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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): August 16, 1999
Commission file number 1-12215
QUEST DIAGNOSTICS INCORPORATED
One Malcolm Avenue
Teterboro, NJ 07608
(201)393-5000
DELAWARE
(State of Incorporation)
16-1387862
(I.R.S. Employer Identification Number)
Exhibit Index appears on Page 5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 16, 1999, Quest Diagnostics Incorporated (the "Company")
completed the acquisition of the clinical laboratory business of SmithKline
Beecham plc ("SmithKline Beecham") for approximately $1.3 billion. Pursuant to
the Stock and Asset Purchase Agreement dated as of February 9, 1999, as amended,
the Company acquired all of the outstanding shares of SBCL, Inc., a holding
company which owns all of the shares of capital stock of SmithKline Beecham
Clinical Laboratories, Inc. ("SBCL"). SBCL is one of the three largest
independent clinical laboratories in the United States. The Company also
acquired assets used in, and assumed liabilities relating to, the non-United
States clinical laboratory testing business of SmithKline Beecham and its
affiliates, including the clinical trials segment of the business. The
acquisition will be accounted for under the purchase method of accounting.
Management believes the acquisition will accelerate the Company's
earnings growth rate, generate savings exceeding $100 million annually after
three years, and be accretive to earnings in 2000 before special charges related
to the transaction. However, it is expected to have an adverse impact on
profitability during the first year after the closing of the acquisition.*
The purchase price was paid through the issuance of 12,564,336 shares
of common stock of the Company, representing approximately 29% of the Company's
outstanding common stock, and the payment of $1.025 billion in cash. The
issuance of the shares to SmithKline Beecham pursuant to the transaction was
approved by the stockholders of the Company at the annual meeting of
stockholders held on June 29, 1999. The Company used existing cash funds and the
borrowings under a new senior secured credit facility to fund the cash purchase
price and related transaction costs of the acquisition, and to repay its
existing bank debt plus interest.
The new credit facility includes the following facilities: a $250
million six-year revolving credit facility; a $400 million six-year amortizing
term loan; a $325 million seven-year term loan with minimal amortization until
the seventh year; a $300 million eight-year term loan with minimal amortization
until the eighth year; and a $50 million two-year capital markets term loan
which does not amortize. (The Company had commitments for a $300 million capital
markets facility but elected to use only $50 million of the commitment, and the
balance of the capital markets commitment expired at the closing). Up to $75
million of the revolving credit facility may be used for letters of credit. At
the closing, Quest Diagnostics borrowed approximately $1.075 billion under the
term loans (including $50 million under the capital markets loan). The Company
used approximately $75 million of the revolving credit facility to pay closing
costs and to replace existing letters of credit; the balance of the revolving
credit facility will be available for borrowing. The new credit facility is
secured by substantially all tangible and intangible assets of the Company and
by a guaranty from, and a pledge of all capital stock and tangible and
intangible assets of, all of the Company's present and future wholly owned
domestic subsidiaries other than certain joint ventures. The borrowings under
the new credit agreement rank senior in priority of repayment to any
subordinated
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* THESE ARE FORWARD-LOOKING STATEMENTS. SEE ITEM 1. "BUSINESS--CAUTIONARY
STATEMENT FOR PURPOSES OF THE `SAFE HARBOR' PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995" CONTAINED IN THE COMPANY'S 1998 ANNUAL REPORT ON
FORM 10-K.
2
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indebtedness. Interest is based on certain published rates plus an applicable
margin which will vary depending on the financial performance of the Company.
The applicable margin will be reduced by 25 basis points after the repayment of
the capital markets term loan. The credit agreement requires the Company to
maintain interest rate hedge agreements covering a notional amount of not less
than 50% of the principal amount outstanding of its net funded debt. The credit
agreement contains various covenants and conditions including the maintenance of
certain financial ratios and tests, and restricts the ability of the Company to,
among other things, incur additional indebtedness and pay dividends on its
common stock.
The Company believes the financing under the new credit facility
provides sufficient financial flexibility and access to funds to finance the
costs to integrate the businesses of the Company and SBCL, to meet seasonal
working capital requirements, to fund capital expenditures and to fund
additional growth opportunities for the foreseeable future.*
At the closing the Company entered into a number of agreements with
SmithKline Beecham, including a stockholders agreement, a clinical trials
agreement, and a transitional services agreement. The material terms of these
agreements are described in the Company's proxy statement dated May 11, 1999
(the "Proxy Statement") sent to the Company's stockholders in connection with
the annual meeting. During the ten year term of the stockholders agreement,
SmithKline Beecham has the right to designate two nominees to the Company's
Board of Directors (or three nominees if the Company's Board of Directors
consists of more than ten directors) as long as SmithKline Beecham owns at least
20% of the outstanding common stock of the Company; and the right to designate
one nominee as long as SmithKline Beecham owns at least 10% but less than 20% of
the outstanding common stock of the Company. At SmithKline Beecham's direction,
at the closing William R. Grant, a former director of SmithKline Beecham, and
John Parker, Senior Vice President, Information Resources of SmithKline Beecham,
were elected to the Company's Board of Directors, which following the closing
consists of nine members.
The stockholders agreement imposes limitations on the right of
SmithKline Beecham to sell or vote its shares and prohibits SmithKline Beecham
from acquiring in excess of 29.5% of the outstanding common stock of the
Company. In conjunction with the transaction, the Board of Directors of the
Company approved an amendment to the preferred share purchase rights of the
Company's common stock. Under the amendment, stockholders would not have the
right to purchase shares of common stock as a result of SmithKline Beecham's
owning the shares of common stock issued in the transaction or SmithKline
Beecham's acquisition of additional shares provided that SmithKline Beecham and
its affiliates do not own more than 29.5% of the Company's outstanding common
stock.
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* THESE ARE FORWARD-LOOKING STATEMENTS. SEE ITEM 1. "BUSINESS--CAUTIONARY
STATEMENT FOR PURPOSES OF THE `SAFE HARBOR' PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995" CONTAINED IN THE COMPANY'S 1998 ANNUAL REPORT ON
FORM 10-K.
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At the closing the Company also entered into two data access agreements
under which SmithKline Beecham has the right to use the Company's laboratory
data. Under the first agreement, SmithKline Beecham has the right to use the
data (a) within SmithKline Beecham and its affiliates and (b) in programs or
services supplied to third parties in support of disease state categories for
which SmithKline Beecham is developing, marketing, or selling pharmaceutical or
vaccine products. Under the second agreement, SmithKline Beecham has the right,
through a new entity to be formed ("Newco") in which the Company will receive
approximately a 29.5% equity interest, to commercialize information programs or
services that include laboratory data (but are materially enhanced by the
inclusion of non-laboratory data). The Company is not required to advance funds
to Newco but the Company's interest will be diluted if the Company does not
advance funds and/or other parties invest in Newco. If SmithKline Beecham does
not organize Newco within 12 months following the closing, the Company can
terminate the second agreement. Both agreements restrict disclosure of data that
would identify the patient or payor without appropriate authorization. Following
an initial term ending 42 months following the closing, each data access
agreement can be renewed by SmithKline Beecham or Newco, as the case may be, for
seven successive one-year renewal options. The fees payable during the initial
term will be below market prices, but during the renewal terms will generally be
determined based on the most favorable rate that the Company charges third
parties for similar access to and use of the Company's laboratory data.
The Proxy Statement includes detailed information concerning the
transaction, including the background of the transaction, the reasons for the
transaction, the factors considered by the Company's Board of Directors in
approving the transaction and the opinion of the Company's financial advisor.
ITEM 7. FINANCIAL STATEMENTS AND SCHEDULES
a. Financial Statements of businesses acquired.
The combined financial statements of SBCL and certain related
affiliates as of December 31, 1998 and 1997 and for the three years
ended December 31, 1998, 1997 and 1996 are incorporated by reference to
Appendix F of the Company's Definitive Proxy Statement dated May 11,
1999.
The combined interim financial statements of SBCL and certain related
affiliates as of June 30, 1999 and for the six months ended June 30,
1999 and 1998 will be filed by amendment by November 1, 1999.
b. Pro forma financial information.
The unaudited pro forma combined balance sheet of the Company as of
June 30, 1999 and the unaudited pro forma combined statements of
operations of the Company for the six months ended June 30, 1999 and
the year ended December 31, 1998 will be filed by amendment by November
1, 1999.
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c. Exhibits
1. Bylaws of the Company, as amended.
2. Amendment No. 1 effective as of July 1, 1999 to the Rights Agreement
dated as of December 31, 1996 between the Company and Harris Trust and
Savings Bank.
3. Stock and Asset Purchase Agreement dated as of February 9, 1999 among
SmithKline Beecham plc, SmithKline Beecham Corporation and the Company
(the "Stock and Asset Purchase Agreement")(incorporated by reference to
Appendix A of the Company's Definitive Proxy Statement dated May 11,
1999).
4. Amendment No. 1 dated August 6, 1999 to the Stock and Asset Purchase
Agreement.
5. Non-Competition Agreement dated as of August 16, 1999 between
SmithKline Beecham plc and the Company.
6. Stockholders Agreement dated as of August 16, 1999 between SmithKline
Beecham plc and the Company.
7. Category One Data Access Agreement dated as of August 16, 1999 between
SmithKline Beecham plc and the Company.
8. Category Three Data Access Agreement dated as of August 16, 1999
between SmithKline Beecham plc and the Company.
9. Participation Agreement dated as of August 16, 1999 between SmithKline
Beecham plc and the Company.
10. Global Clinical Trials Agreement dated as of August 16, 1999 between
SmithKline Beecham plc and the Company
11. Credit Agreement dated as of August 16, 1999 among the Company, as
Borrower, the Guarantors party thereto, Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arranger and
Syndication Agent, Banc of America Securities LLC, as Joint Lead
Arranger, Bank of America, N.A., as Administrative Agent, Wachovia Bank
N.A., as Co-Documentation Agent, The Bank of New York, as
Co-Documentation Agent and the Lenders party thereto.
12. Security Agreement dated as of August 16, 1999 among the Company, each
of the Guarantors party thereto and Bank of America, N.A., as
Administrative Agent.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
August 16, 1999
QUEST DIAGNOSTICS INCORPORATED
By:________________________________________
Name: Robert A. Hagemann
Vice President and Chief Financial Officer
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Exhibit 1
QUEST DIAGNOSTICS INCORPORATED
A Delaware corporation (formerly known as Corning Clinical Laboratories Inc.,
MetPath Inc. and Corning Lab Services Inc.)
AMENDED AND RESTATED BY-LAWS
As amended through June 29, 1999
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QUEST DIAGNOSTICS INCORPORATED
A Delaware corporation
AMENDED AND RESTATED BY-LAWS
TABLE OF CONTENTS
ARTICLE I
STOCKHOLDERS
Page
----
Section 1.01 Annual Meetings...................................................1
Section 1.02 Special Meetings..................................................1
Section 1.03 Notice of Meetings................................................1
Section 1.04 Business Transacted at Special
Meetings of Stockholders..........................................1
Section 1.05 Quorum............................................................1
Section 1.06 Nominations and Stockholder
Business..........................................................2
ARTICLE II
BOARD OF DIRECTORS
Section 2.01 General Powers....................................................4
Section 2.02 Number and Term of Office.........................................4
Section 2.03 Annual and Regular Meetings.......................................4
Section 2.04 Special Meetings; Notice..........................................4
Section 2.05 Telephonic Meetings...............................................5
Section 2.06 Quorum and Vote...................................................5
Section 2.07 Action Without a Meeting..........................................5
Section 2.08 Manner of Acting..................................................5
Section 2.09 Resignations......................................................5
Section 2.10 Reliance on Accounts and
Reports, etc......................................................5
Section 2.11 Committees........................................................5
ARTICLE III
OFFICERS
Section 3.01 Number and Designation............................................6
Section 3.02 Additional Officers...............................................6
(i)
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Page
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Section 3.03 Election..........................................................6
Section 3.04 Removal and Vacancies.............................................6
Section 3.05 Duties of the Chairman of
the Board of Directors............................................6
Section 3.06 Duties of the President...........................................6
Section 3.07 Duties of the Vice President .....................................7
Section 3.08 Duties of the Secretary...........................................7
Section 3.09 Duties of the Treasurer...........................................7
Section 3.10 Duties of the Controller..........................................7
Section 3.11 Duties of the Assistant Secretary.................................7
Section 3.12 Duties of the Assistant Controller................................8
Section 3.13 Duties of the Assistant Treasurer.................................8
ARTICLE IV
EXECUTION OF INSTRUMENTS; DEPOSITS; FINANCES
Section 4.01 General...........................................................8
Section 4.02 Corporate Indebtedness............................................8
Section 4.03 Checks, Drafts, etc...............................................8
Section 4.04 Deposits..........................................................9
Section 4.05 Dividends.........................................................9
Section 4.06 Fiscal Year.......................................................9
ARTICLE V
CAPITAL STOCK
Section 5.01 Certificates of Stock.............................................9
ARTICLE VI
SEAL; OFFICES
Section 6.01 Seal..............................................................9
Section 6.02 Offices..........................................................10
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification..................................................10
ARTICLE VIII
AMENDMENTS
Section 8.01 Amendments.......................................................12
(ii)
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AMENDED AND RESTATED BY-LAWS
OF
QUEST DIAGNOSTICS INCORPORATED
ARTICLE I
STOCKHOLDERS
Section 1.01. ANNUAL MEETINGS. The annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such other
business as properly may come before such meeting shall be held at such place
either within or outside the State of Delaware, at such time and date as shall
be fixed from time to time by resolution of the Board of Directors and as set
forth in the notice of the meeting.
Section 1.02. SPECIAL MEETINGS. Except as otherwise required by law, special
meetings of the stockholders may be called only the Board of Directors.(1) Such
special meetings of the stockholders shall be held at such places, within or
outside the State of Delaware, as shall be specified in the respective notices
or waivers of notice thereof.
Section 1.03. NOTICE OF MEETINGS. The Secretary or any Assistant Secretary shall
cause written notice of the date, time and place of each meeting of the
stockholders to be given, at least ten but not more than fifty days prior to the
meeting, to each stockholder of record entitled to vote. Such notice shall be
given either personally or by mail or other means of written communication,
addressed to each stockholder at the address of such stockholder appearing on
the books of the Corporation at the time such notice is dispatched. Such further
notice shall be given as may be required by law. Notice of any meeting of
stockholders need not be given to any stockholder who shall sign a waiver of
such notice in writing, whether before or after the time of such meeting. Notice
of any adjourned meeting of the stockholders of the Corporation need not be
given.
Section 1.04. BUSINESS TRANSACTED AT SPECIAL MEETINGS OF STOCKHOLDERS. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice thereof.
Section 1.05. QUORUM. Except as at the time otherwise required by statute or by
the Certificate of Incorporation, the presence at any stockholders meeting, in
person or by proxy, of the holders of record of shares of stock (of any class)
entitled to vote at the meeting, aggregating a majority of the total number of
shares of stock of all classes then issued and outstanding and entitled to vote
at the meeting, shall be necessary and sufficient to constitute a quorum for the
transaction of business.
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(1) Amended 10/22/98
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2
Section 1.06. NOMINATIONS AND STOCKHOLDER BUSINESS.
(a) ANNUAL MEETING OF STOCKHOLDERS.
(1) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Corporation who was a stockholder
of record at the time of giving of notice provided for in this Section 1.06, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 1.06.
(2) For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this
Section 1.06, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation between January 1 and February 15 of the year in which such annual
meeting is held. Such stockholder's notice shall set forth (i) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (ii) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (A) the name
and address of such stockholder, as they appear on the Corporation's books, and
of such beneficial owner and (B) the class and number of shares of the
Corporation which are owned beneficially and of record by such stockholder and
such beneficial owner.
(3) Notwithstanding, anything in the second sentence of paragraph (a)(2) of this
Section 1.06 to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for Director or specifying the
size of the increased Board of Directors made by the Corporation at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 1.06 shall also be considered
timely, but only with respect to nominees for any new position created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of
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3
the Corporation not later than the close of business on the 10th day following
the day on which such public announcement is first made by the Corporation.2
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be conducted at a
special meeting of stockholders as shall have been brought before the meeting
pursuant to the Corporation's notice of meeting. Nominations of persons for
election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the Corporation's
notice of meeting (i) by or at the direction of the Board of Directors or (ii)
by any stockholder of the Corporation who is a stockholder of record at the time
of giving of notice provided for in this Section 1.06, who shall be entitled to
vote at the meeting and who complies with the notice procedures set forth in
this Section 1.06. Nominations by stockholders of persons for election to the
Board of Directors may be made at such a special meeting of stockholders if the
stockholder's notice required by paragraph (a)(2) of this Section 1.06 shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the 90th day prior to such special meeting, and not later than
the close of business on the later of the 60th day prior to such special meeting
or the 10th day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(c) GENERAL.
(1) Only such persons who are nominated in accordance with the procedures set
forth in this Section 1.06 shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Section 1.06. The Chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting, was made in accordance with the procedures set forth in this Section
1.06 and, if any proposed nomination or business is not in compliance with this
Section 1.06, to declare that such defective proposal shall be disregarded.
(2) For purposes of this Section 1.06, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Sections 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 1.06, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
Section 1.06. Nothing in this Section 1.06 shall be deemed to affect any rights
of stockholders to request
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(2) Amended 5/11/99
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4
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. GENERAL POWERS. The property, affairs and business of the
Corporation shall be managed by the Board of Directors. The Board of Directors
may exercise all the powers of the Corporation, whether derived from law or the
Certificate of Incorporation, except such powers as are, by statute, by the
Certificate of Incorporation or by these By-Laws, vested solely in the
stockholders of the Corporation. No Director need be a stockholder of the
Corporation.
Section 2.02. NUMBER AND TERM OF OFFICE. The Board of Directors shall consist of
such number (but in no event less than three nor more than twelve) of Directors
as may be determined from time to time by resolution adopted by affirmative vote
of a majority of the whole Board of Directors. Each Director (whenever elected)
shall hold office until his or her successor shall have been elected and shall
have qualified, or until his or her death, or until he or she shall have
resigned in the manner provided in Section 2.09 hereof or shall have been
removed in accordance with the Certificate of Incorporation. No person shall be
nominated for election or reelection to the Board of Directors if at the time of
such election or reelection such person shall have attained the age of 70
years.3
Section 2.03. ANNUAL AND REGULAR MEETINGS. The annual meeting of the Board of
Directors, for the choosing of officers and for the transaction of such other
business as may come before the meeting, shall be held in each year as soon as
possible after the annual meeting of the stockholders at the place of such
annual meeting of the stockholders, and notice of such annual meeting of the
Board of Directors shall not be required to be given. The Board of Directors
from time to time may provide by resolution for the holding of regular meetings
and fix the time and place (which may be within or outside the State of
Delaware) thereof. Notice of such regular meetings need not be given; provided,
however, that in case the Board of Directors shall fix or change the time or
place of regular meetings, notice of such action shall be given personally or by
mail, facsimile or similar means of communication promptly to each Director who
shall not have been present at the meeting at which such action was taken.
Section 2.04. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, if any, or
by the President (or, in the absence or disability of the Chairman of the Board
and the President, by any Vice President), or by any two Directors, at such time
and place (which may be within or outside of the State of Delaware) as may be
specified in the respective notices or waivers
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(3) Amended effective 1/1/2000
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5
of notice thereof. Special meetings of the Board of Directors may be called on
two days' notice to each Director, personally or by telephone or facsimile or on
four days' notice by mail. Notice of any special meeting need not be given to
any Director who shall be present at such meeting, or to any Director who shall
waive notice of such meeting in writing, whether before or after the time of
such meeting, and any business may be transacted thereat. No notice need be
given of any adjourned meeting.
Section 2.05. TELEPHONIC MEETINGS. Directors may participate in a meeting of the
Board of Directors, or a meeting of any committee designated by the Board, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this By-Law shall constitute presence in
person at such meeting.
Section 2.06. QUORUM AND VOTE. At all meetings of the Board of Directors, the
presence of a majority of the total authorized number of Directors under Section
2.02 hereof shall be necessary and sufficient to constitute a quorum for the
transaction of business. Except when otherwise required by statute, the vote of
a majority of the total number of Directors present and acting at a meeting at
which a quorum is present shall be the act of the Board of Directors. In the
absence of a quorum, a majority of the Directors present may adjourn the meeting
from time to time, until a quorum shall be present.
Section 2.07. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken at any meeting of the Board of Directors or any meeting of a Committee of
the Board of Directors may be taken without a meeting, if written consents
thereto are signed by all members of the Board or Committee and such written
consents are filed with the minutes of proceedings of the Board.
Section 2.08. MANNER OF ACTING. The Directors shall act only as a Board, and the
individual Directors shall have no power as such, except as permitted by
statute.
Section 2.09. RESIGNATIONS. Any Director may resign at any time by delivering a
written resignation to the Chairman of the Board, if any, the President, a Vice
President, the Secretary or any Assistant Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery.
Section 2.10. RELIANCE ON ACCOUNTS AND REPORTS, ETC. A Director, or a member of
any committee designated by the Board of Directors, in the performance of his or
her duties, shall be fully protected in relying in good faith on the records of
the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its officers or employees, or committees
of the Board of Directors or by any other person as to matters the Director or
member reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation.
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6
Section 2.11. COMMITTEES. The Board may establish such committees having such
responsibilities and composition as it shall from time to time by resolution
determine.
ARTICLE III
OFFICERS
Section 3.01. NUMBER AND DESIGNATION. The officers of the Corporation shall be
chosen by the Board of Directors and shall have such titles and duties as shall
be determined from time to time by the Board of Directors. All officers of the
Corporation shall hold office until their successors are chosen and qualify or
their earlier resignation or removal. Any number of offices may be held by the
same person. The Chairman shall be a member of the Board of Directors.4
Section 3.02. ADDITIONAL OFFICERS APPOINTED BY THE CHAIRMAN OR THE CHIEF
EXECUTIVE OFFICER. The Board of Directors may delegate its Chairman or the Chief
Executive Officer to appoint and remove such additional officers as the Chairman
or the Chief Executive Officer, as the case may be, shall designate in writing,
with such authority as shall be set forth in writing, and such appointments
shall be reported to the Board of Directors.5
Section 3.03. ELECTION. The Board of Directors at its first meeting or such
subsequent meetings as shall be held prior to its first annual meeting, and
thereafter annually at its annual meeting, shall choose the officers of the
Corporation. If any officers are not chosen at an annual meeting, such officers
may be chosen at any subsequent regular or special meeting.
Section 3.04. REMOVAL AND VACANCIES. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors, either with or without cause. Any vacancy
occurring in any office of the Corporation shall be filled by the Board of
Directors.
Section 3.05. DUTIES OF THE CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, if present, shall preside at all stockholders' meetings
and all meetings of the Board at which he is present and shall have such other
duties as shall be assigned to him or her by the Board of Directors. The
Chairman may be the Chief Executive Officer of the Corporation.
Section 3.06. DUTIES OF THE PRESIDENT. The President shall have direct charge of
the business of the Corporation, subject to the general control of the Board of
Directors, and may be the Chief Executive Officer and/or the Chief Operating
Officer of the Corporation. In the absence of the Chairman of the Board or if no
Chairman of the Board has been chosen, the President shall also have the duties
of the Chairman of the Board.
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(4) Amended effective 6/29/1999.
(5) Amended effective 6/29/1999.
<PAGE>
7
Section 3.07. DUTIES OF THE VICE PRESIDENT. In the event of the absence or
disability of the Chairman of the Board and the President, the Executive or
Senior Vice President, if any, or if absent, any Vice President designated by
the Board of Directors, shall perform all the duties of the President, and when
so acting, shall have all the powers of, and be subject to all the restrictions
upon, the President. Except where by law the signature of the President is
required, each of the Vice Presidents shall possess the same power as the
President to sign all certificates, contracts, obligations and other instruments
of the Corporation. Any Vice President shall perform such other duties and may
exercise such other powers as from time to time may be assigned to him or her by
these By-Laws or by the Board of Directors or the President. An Executive Vice
President may be the Chief Operating Officer of the Corporation.
Section 3.08. DUTIES OF THE SECRETARY. The Secretary shall, if present, act as
Secretary of, and keep the minutes of, all the proceedings of the meetings of
the stockholders and of the Board of Directors and of any committee of the Board
of Directors in one or more books to be kept for that purpose; shall perform
such other duties as shall be assigned to him or her by the President or the
Board of Directors; and, in general, shall perform all duties incident to the
office of Secretary.
Section 3.09. DUTIES OF THE TREASURER. The Treasurer shall keep or cause to be
kept full and accurate records of all receipts and disbursements in the books of
the Corporation and shall have the care and custody of all funds and securities
of the Corporation. He or she shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, shall render to the President and the
Board of Directors, whenever they request it, an account of all of his or her
transactions as Treasurer and shall perform such other duties as may be assigned
to him or her by the President or the Board of Directors; and, in general, shall
perform all duties incident to the office of Treasurer.
Section 3.10. DUTIES OF THE CONTROLLER. The Controller shall be the chief
accounting officer of the Corporation. The Controller shall keep or cause to be
kept all books of account and accounting records of the Corporation and shall
keep and maintain, or cause to be kept and maintained, adequate and correct
accounts of the properties and business transactions of the Corporation. The
Controller shall prepare or cause to be prepared appropriate financial
statements for the Corporation and shall perform such other duties as may be
assigned to him or her by the President or the Board of Directors; and, in
general, shall perform all duties incident to the office of Controller.
Section 3.11. DUTIES OF THE ASSISTANT SECRETARY. The Assistant Secretary, if
any, shall, in the absence or disability of the Secretary, exercise the powers
and perform the duties of the Secretary, and shall perform such other duties as
shall be assigned to him or her by the President or the Board of Directors.
Section 3.12. DUTIES OF THE ASSISTANT CONTROLLER. The Assistant Controller, if
any, shall, in the absence or disability of the Controller, exercise the powers
and perform the duties
<PAGE>
8
of the Controller, and shall perform such other duties as shall be assigned to
him or her by the President or the Board of Directors.
Section 3.13. DUTIES OF THE ASSISTANT TREASURER. The Assistant Treasurer, if
any, shall, in the absence or disability of the Treasurer, exercise the powers
and perform the duties of the Treasurer, and shall perform such other duties as
shall be assigned to him or her by the President or the Board of Directors.
ARTICLE IV
EXECUTION OF INSTRUMENTS; DEPOSITS; FINANCES
Section 4.01. GENERAL. Subject to the provisions of Sections 4.02, 4.03 and 4.04
hereof, all deeds, documents, transfers, contracts, and agreements and other
instruments requiring execution by the Corporation shall be signed by the
Chairman of the Board, the President, a Vice President or the Treasurer, or as
the Board of Directors may otherwise from time to time authorize by resolution.
Any such authorization may be general or confined to specific instances.
Section 4.02. CORPORATE INDEBTEDNESS. No loan shall be contracted on behalf of
the Corporation, and no evidences of indebtedness shall be issued in its name,
unless authorized by the Board of Directors. Such authorizations of the Board
may be general or confined to specific instances. Loans authorized by the Board
of Directors may be effected at any time for the Corporation from any bank,
trust company or other institution, or from any firm, corporation or individual.
All bonds, debentures, notes and other obligations or evidences of indebtedness
of the Corporation issued for such loans as the Board shall authorize shall be
made, executed and delivered as the Board of Directors shall authorize. All
notes and other obligations or evidences of indebtedness permitted hereunder
without authorization of the Board of Directors shall be signed by the
President, a Vice President or the Treasurer. When so authorized by the Board of
Directors, any part of or all the properties, including contract rights, assets,
business or goodwill of the Corporation, whether then owned or thereafter
acquired, may be mortgaged, pledged, hypothecated or conveyed or assigned in
trust as security for the payment of such bonds, debentures, notes and other
obligations or evidences of indebtedness to the Corporation, and of the interest
thereon, by instruments executed and delivered in the name of the Corporation.
Section 4.03. CHECKS, DRAFTS, ETC. All checks, drafts, bills of exchange or
orders for the payment of money, issued in the name of the Corporation, shall be
signed only by the Treasurer or such other person or persons and in such manner
as may from time to time be designated by the Board of Directors, which
designation may be general or confined to specific instances; and unless so
designated, no person shall have any power or authority thereby to bind the
Corporation or to pledge its credit or to render it liable.
<PAGE>
9
Section 4.04. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select. The Board of Directors may make such special rules and regulations with
respect to such bank accounts, not inconsistent with the provisions of these
By-Laws, as it may deem expedient. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, checks, drafts and
other orders for the payment of money which are payable to the order of the
Corporation shall be endorsed, assigned and delivered by the Treasurer or such
other person or persons and in such manner as may from time to time be
designated by the Board of Directors.
Section 4.05. DIVIDENDS. Dividends upon the stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law. Such
declaration may be continuing or limited to a specific payment or distribution.
Dividends may be paid in cash, in property, or in shares of stock, subject to
the provisions of the Certificate of Incorporation.
Section 4.06. FISCAL YEAR. The fiscal year of the Corporation shall be the
calendar year, unless otherwise fixed by resolution of the Board of Directors.
ARTICLE V
CAPITAL STOCK
Section 5.01. CERTIFICATES OF STOCK. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by, or in the name of the
Corporation by, the Chairman of the Board of Directors, or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or by the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by such holder in the Corporation.
ARTICLE VI
SEAL; OFFICES
Section 6.01. SEAL. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its incorporation and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 6.02. OFFICES. The Corporation may have offices at such other places
both within or outside the State of Delaware as the Board of Directors may from
time to time determine or as the business of the Corporation may require.
<PAGE>
10
ARTICLE VII
INDEMNIFICATION
Section 7.01. INDEMNIFICATION. (a) No director of the Corporation shall have any
personal liability to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, provided that this provision shall
not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit.
(b) Each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action either in an official
capacity as a director or officer or in any other capacity while serving as a
director or officer, shall be indemnified and held harmless by the Corporation
to the fullest extent authorized by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expenses,
liability and loss (including attorneys' fees, judgments, fines, excise taxes
pursuant to the Employee Retirement Income Security Act of 1974, as amended, or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of his or her heirs, executors and administrators;
provided, however, that, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to be indemnified conferred in
this Section 7.01 shall be a contract right and shall include the right to be
paid by the Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, the payment of
such expenses incurred by the director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is to
be rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan), in advance of the final
disposition of proceeding, shall be made only upon delivery to the Corporation
<PAGE>
11
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Article or otherwise. The
Corporation may, by action of its Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
(c) The indemnification provided by this Section 7.01 shall not limit
or exclude any rights, indemnities or limitations of liability to which any
person may be entitled, whether as a matter of law, under the Certificate of
Incorporation of the Corporation, by agreement, vote of the stockholders or
disinterested directors of the Corporation or otherwise.
(d) If a claim under paragraph (b) of this Section 7.01 is not paid in
full by the Corporation within sixty (60) days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the General Corporation Law of the State of Delaware for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard or conduct set forth in the General Corporation
Law of the State of Delaware, nor an actual determination by the Corporation
(including its Board, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall create a
presumption that the claimant has not met the applicable standard of conduct.
(e) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the General Corporation Law of the State of Delaware.
<PAGE>
12
ARTICLE VIII
AMENDMENTS
Section 8.01. AMENDMENTS. These By-Laws may only be altered or repealed and new
By-Laws adopted by resolution of the Board of Directors or of the shareholders.6
- ----------
(6) Amended 10/22/98
<PAGE>
Exhibit 2
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
THIS AMENDMENT (this "Amendment") effective as of the 1st day of July,
1999, amends and modifies a certain Rights Agreement dated as of December 31,
1996, (the "Rights Agreement") between Quest Diagnostics Incorporated (the
"Company") and Harris Trust and Savings Bank (the "Rights Agent"). All terms
defined in the Rights Agreement shall have the same meanings in this Amendment
unless otherwise defined.
WHEREAS, pursuant to a Stock and Asset Purchase Agreement dated as of
February 9, 1999, as amended (the "Purchase Agreement") among SmithKline Beecham
plc ("SB"), SmithKline Beecham Corporation ("SBC") and the Company, the Company
will acquire the clinical laboratory business of SmithKline Beecham plc,
including all of the issued and outstanding capital stock of SBCL, Inc.
("SBCL"), for approximately $1.025 billion in cash and 12,564,336 shares of
common stock, par value $.01 per share ("Common Shares"), of the Company.
WHEREAS, as a result of the issuance of 12,564,336 Common Shares to SB
or SBC pursuant to the Purchase Agreement, SB will be the Beneficial Owner of
approximately 29.5% of the outstanding Common Shares.
WHEREAS, under the terms of the Rights Agreement, SB would be deemed an
"Acquiring Person," which is defined therein as "any Person...who or which,
together with all Affiliates and Associates...shall be the Beneficial Owner...of
20% or more of the Common Shares of the Company then outstanding."
WHEREAS, the Rights Agreement provides that, subject to certain
conditions, if any person or group becomes an Acquiring Person, then each Right
(other than Rights beneficially owned by the Acquiring Person and certain
affiliated persons) would become exercisable and could, among other things,
entitle the holder to purchase Common Shares for a purchase price equal to
approximately half of the current market price.
WHEREAS, it is not the intent of the Company that solely by reason of
the transactions contemplated by the Purchase Agreement, SmithKline Beecham and
its affilliates be deemed an Acquiring Person which could result in the Rights
becoming exercisable.
WHEREAS, on February 8, 1999, the Board of Directors of the Company
adopted a resolution approving the execution of this Amendment to the Rights
Agreement and directs the Rights Agent to enter into this Amendment.
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
1. All terms not defined herein have the meaning set forth in the
Rights Agreement.
<PAGE>
2. The definition of "Acquiring Person" in Section 1(a) of the Rights
Agreement is hereby amended by the addition of the following sentence at the end
of such Section:
"Notwithstanding the foregoing, SmithKline Beecham plc ("SB"),
with its Affiliates, Associates and Persons of which they are
Associates, shall not be considered an "Acquiring Person" by
reason of the issuance to SB or its Affiliates of 12,564,336
Common Shares pursuant to the Stock and Asset Purchase
Agreement dated as of February 9, 1999, as amended (the
"PURCHASE AGREEMENT") among SB, SmithKline Beecham Corporation
and the Company; and (1) SB, together with its Affiliates,
shall not be considered an "Acquiring Person" unless and until
such time as SB or any of its Affiliates acquire Beneficial
Ownership of additional Common Shares (other than the
12,564,336 Common Shares to be issued pursuant to the Purchase
Agreement) if the effect of such acquisition would be to cause
SB, together with its Affiliates, to be the Beneficial Owner
at the time of such acquisition of more than 29.5% of the
outstanding Common Shares; and (2) Persons of which SmithKline
Beecham and its Affiliates are Associates (other than
SmithKline Beecham and its Affiliates) will not be considered
to be the Beneficial Owner of the Common Shares acquired by
SmithKline Beecham and its Affiliates pursuant to the Purchase
Agreement."
3. This Amendment shall be deemed to be a contract made under the laws
of the State of Delaware and for all purposes shall be governed by and construed
in accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
4. Except as expressly amended hereby, all the terms and conditions of
the Rights Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date set forth above.
QUEST DIAGNOSTICS INCORPORATED HARRIS TRUST AND SAVINGS BANK,
Rights Agent
By: /s/ Leo C. Farrenkopf, Jr. By: /s/ Simone Harris
Title: Vice President & Secretary Title: Trust Officer
<PAGE>
Exhibit 4
AMENDMENT NO. 1
TO THE STOCK AND ASSET PURCHASE AGREEMENT
AMENDMENT NO. 1 dated August 6, 1999 (this "AMENDMENT"), among
SmithKline Beecham plc, a public limited company organized under the laws of
England ("SELLER"), SmithKline Beecham Corporation, a Pennsylvania corporation
and an indirect wholly owned subsidiary of Seller ("SELLER SUBSIDIARY"), and
Quest Diagnostics Incorporated, a Delaware corporation ("BUYER"), to the Stock
and Asset Purchase Agreement dated as of February 9, 1999 (the "AGREEMENT")
among Seller, Buyer and, for purposes of Articles IX, XI and XIII of the
Agreement only, Seller Subsidiary. Capitalized terms used herein without
definition have the meanings assigned to them in the Agreement.
WHEREAS, pursuant to Section 13.02 of the Agreement, the
Agreement may be amended by a written amendment signed by Seller, Seller
Subsidiary and Buyer; and
WHEREAS, Seller, Seller Subsidiary and Buyer wish to amend the
Agreement as to certain of its provisions, as specified herein;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, Seller, Seller Subsidiary
and Buyer hereby agree to amend the Agreement as follows:
SECTION 1. AMENDMENT TO SECTION 1.01(A). (a) Section 1.01(a)
hereby amended by deleting the definition of "Intellectual Property Agreements"
therefrom.
(b) Section 1.01(a) is hereby further amended by deleting the
definition of "License Agreement" therefrom and replacing it with the following
definition:
""LICENSE AGREEMENT" means the Names License Agreement
attached hereto as Exhibit G."
(c) Section 1.01(a) is hereby further amended by deleting the
definition of "Data Access Agreement" therefrom and replacing it with the
following definition:
""DATA ACCESS AGREEMENT" means the Category One Laboratory
Data Access Agreement, the Category Three Laboratory Data Access
Agreement, the Participation Agreement and the Encoding Letter
Agreement, in the form attached hereto as Exhibits B-1 through B-4,
respectively, and any related letter agreements.
<PAGE>
2
SECTION 2. AMENDMENT TO SECTION 2.01(C)(III). Section
2.01(c)(iii) is hereby amended by deleting "Non-U.S. Leased Property" therefrom
and replacing it with "Non-U.S. Leased Real Property".
SECTION 3. NEW SECTION 2.03(D). A new Section 2.03(d) is
hereby added to read as follows:
"(d) At Closing (i) Seller and Buyer shall each execute (A) a
copyright license agreement (the "COPYRIGHT LICENSE AGREEMENT"), in the
form attached hereto as Exhibit F-1, and (B) a trademark license
agreement (the "TRADEMARK LICENSE AGREEMENT"), in the form attached
hereto as Exhibit F-2 and (ii) Seller shall deliver to Buyer (A) a
copyright assignment (the "COPYRIGHT ASSIGNMENT"), in the form attached
hereto as Exhibit F-3, (B) a patent assignment (the "PATENT
ASSIGNMENT"), in the form attached hereto as Exhibit F-4, and (C)
trademark assignments (the "TRADEMARK ASSIGNMENTS"), in the forms
attached hereto as Exhibits F-5 through F-9 (the Trademark Assignments,
collectively with the Copyright License Agreement, the Trademark
License Agreement, the Copyright Assignment and the Patent Assignment,
are referred to herein as the "INTELLECTUAL PROPERTY AGREEMENTS")."
SECTION 4. NEW SECTION 2.04(D). A new Section 2.04(d) is
hereby added to read as follows:
"(d) Buyer agrees to fund the employer contribution which
would have otherwise been paid into Seller's 401(k) Plan, into Buyer's
401(k) Plan, for the first payroll paid to Continued Employees
subsequent to the Closing Date; PROVIDED that Seller shall accrue such
liability and such liability shall be included in the Statement of Net
Worth."
SECTION 5. AMENDMENT TO SECTION 3.17. Section 3.17 is amended
hereby by inserting "(a)" after "Employees." and before "Except".
SECTION 6. AMENDMENT OF SECTION 3.20. Section 3.20 is hereby
amended to add the following sentence to the end of such Section:
"Notwithstanding the foregoing, Seller makes no
representations or warranties with respect to the Names."
SECTION 7. NEW SECTION 3.22. A new Section 3.22 is hereby
added to read as follows:
<PAGE>
3
"SECTION 3.22. DISCLOSURE SUPPLEMENT. (a) Seller hereby
delivers to Buyer a supplement to the Seller Disclosure Schedule (the
"SELLER DISCLOSURE SUPPLEMENT"), in the form attached hereto. The
Seller Disclosure Supplement shall amend the Seller Disclosure Schedule
and such amendment shall be effective as of February 9, 1999. Each
reference to the Seller Disclosure Schedule in the Agreement shall be
deemed to refer the Seller Disclosure Schedule as amended and
supplemented by the Seller Disclosure Supplement."
(b) Buyer hereby delivers to Seller a supplement to the Buyer
Disclosure Schedule (the "BUYER DISCLOSURE SUPPLEMENT"), in the form
attached hereto. The Buyer Disclosure Supplement shall amend the Buyer
Disclosure Schedule and such amendment shall be effective as of
February 9, 1999. Each reference to the Buyer Disclosure Schedule in
the Agreement shall be deemed to refer the Buyer Disclosure Schedule as
amended and supplemented by the Buyer Disclosure Supplement."
SECTION 8. AMENDMENT TO SECTION 5.02(K). Section 5.02(k) is
hereby amended by inserting ", for each such individual lease," after the word
"which".
SECTION 9. AMENDMENT TO SECTION 5.11(A). (a) Section 5.11(a)
is hereby amended by deleting "Exhibit 5.11(a)" therefrom and replacing it with
"Section 5.11(a) of the Seller Disclosure Schedule".
(b) Section 5.11(a) is hereby further amended by deleting
"Section 5.13(a)" therefrom and replacing it with "Section 5.11(a)".
SECTION 10. NEW SECTION 5.13. A new Section 5.13 is hereby
added to read as follows:
<PAGE>
4
"SECTION 5.13. NO SOLICITATION. Seller shall not, and shall
not permit its Affiliates to, directly or indirectly, (a) prior to the
second anniversary of the Closing Date, induce or attempt to induce any
officer or employee to leave the employ of Buyer, the Company or the
Company Subsidiary or violate the terms of their contracts, or any
employment arrangements, with Buyer, the Company or the Company
Subsidiary or (b) hire or employ any (i) Senior Level Employee or any
Continued Employee who is a sales manager of the Business prior to the
second anniversary of the Closing Date, or (ii) Continued Employee who
is primarily engaged in providing information technology services and
is either a vice president or a participant in Seller's MRI Programme
("IT PERSONNEL") for the period beginning as of the Closing Date and
ending on December 31, 2000. Notwithstanding the foregoing, the
limitations set forth in this Section 5.13 shall not apply to the
inducement, attempted inducement, hiring or employment of any Person
other than any Senior Level Employee, sales manager or member of IT
Personnel, who responds to a BONA FIDE advertisement placed in general
circulation and which is not targeted at any of the Persons to whom
Section 5.13(a) or (b) would otherwise apply."
SECTION 11. AMENDMENT TO SECTION 6.07. Section 6.07 is hereby
amended by adding the following sentence to the end thereof:
"Seller makes no representations or warranties with respect to
the Names."
SECTION 12. AMENDMENT TO SECTION 7.09(A). Section 7.09(a) of
the Agreement is hereby amended by deleting "$1.0 billion" therefrom and
replacing it with "$980 million".
SECTION 13. AMENDMENT TO SECTION 7.09(A). Section 7.09(a) is
hereby amended by adding the following sentence between the first and second
sentences thereof:
"For the avoidance of doubt, a subletting of the property
identified as item 2 of Section 7.09 of the Seller Disclosure Schedule
for the same term and on substantially the same economic terms as the
existing lease shall fully satisfy Seller's obligations under this
Section 7.09(a) with respect to such property."
SECTION 14. AMENDMENT TO SECTION 8.14. Section 8.14 is hereby
amended by adding "Except as provided in Note 18 of Exhibit A of the Transition
Services Agreement," to the beginning of the second sentence thereof.
SECTION 15. AMENDMENT TO SECTION 8.15. Section 8.15 is hereby
deleted in its entirety and replaced with a new Section 8.15 to read as follows:
"SECTION 8.15. MRI BONUSES. (a) With respect to Seller's
Millennium Retention Initiative Programme ("SELLER'S MRI PROGRAMME"),
Buyer shall establish,
<PAGE>
5
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 the 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 (based upon a
calendar year accrual for bonuses paid or payable in 1997,
1998 and 1999 and prorated for 1999 based upon the assumption
that 50% of the 1999 annual cash award was paid or accrued by
Seller)) as a percentage of the aggregate Three MRI Annual
Awards which are paid, respectively, by the Seller and Buyer
under such Programmes.
<PAGE>
6
(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 the Seller, based upon the closing price
per share for Parent's American Depository 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) 50% (if only the level 1 performance is achieved) or
100% (if the level 2 performance threshold is achieved) as
determined by Buyer (after consultation with Seller, as
provided hereinabove) in respect of the Substitute Year 2000
Awards.
(iii) 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. To the extent there is any
inconsistency between the language set forth in this Section
8.15 and the allocation set forth in Section 8.15 of the
Seller Disclosure Schedule, the latter shall govern."
SECTION 16. NEW SECTION 8.16. A new Section 8.16 is hereby
added to read as follows:
"Promptly after the Closing, but in any event within sixty
days following the Closing Date, Buyer shall cause SBCL to pay all
amounts earned through the Closing to all of the Continued Employees in
accordance with all variable compensation plans maintained by Seller or
any of its Affiliates for the benefit of the Continued Employees
immediately prior to the Closing including, but not limited to, those
items listed in Section 3.13 of the Seller's Disclosure Schedule. In
order to effect such payment, Seller shall be responsible for the
administration of such bonus payments, including the preparation and
distribution of any communications, the calculation of such bonus
payments and shall provide Buyer a copy of all such communications and
the basis for calculations. The aggregate gross amount of such
payments, and other amounts accruing as a result of such payments
(including payroll taxes and employer matches under the 401(k) or other
plans) shall be accrued and reflected as a liability on the statement
of Consolidated Tangible Net Worth of the Business as of the Closing
Date."
SECTION 17. AMENDMENT TO SECTION 9.12(H). Section 9.12(h) is
hereby amended by deleting the reference to "paragraph (h)" from the second
sentence thereof and replacing it with "paragraph (g)".
<PAGE>
7
SECTION 18. AMENDMENT TO SECTION 9.12(I). Paragraph (i) of
Section 9.12 of the Agreement is hereby amended and restated in its entirety to
read as follows:
"(i) In order to allow Buyer to make proper payments of quarterly
estimated U.S. federal, state and local Taxes, and proper payments in
connection with extensions of time to file U.S. federal, state and
local Tax Returns, on behalf of the Buyer Group (including the Company
and the Company Subsidiary) for taxable periods (or portions thereof)
ending after the Closing Date (such quarterly payments and extension
payments hereinafter are referred to as "Post-Closing Estimated
Taxes"), Seller and Seller Subsidiary estimate that, following the
Closing Date, the Company and the Company Subsidiary will be required
by U.S. federal income Tax law to report no more than $159,755,404 of
net Code Section 481 adjustments 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) the Company Subsidiary's applications
for a change in accounting method with respect to accounts receivable
to be effective beginning with the 1998 taxable year of the Company
Subsidiary (the "Estimated Adjustments"), and that the Company and the
Company Subsidiary will carry forward $0 of net operating losses from
Pre-Closing Tax Periods to Post-Closing Tax Periods (the "Estimated
NOLs"). Following the Closing Date, when necessary or appropriate,
Seller Subsidiary will notify Buyer, in writing, of any changes in the
amounts of the Estimated Adjustments and the Estimated NOLs, and of any
compensation deductions believed to be available to the Company or the
Company Subsidiary in respect of the exercise of options on Seller
Shares (the "Estimated Compensation Deductions"), and Seller Subsidiary
will provide Buyer with reasonable documentation in support of such
changes and the Estimated Compensation Deductions. Within 30 days prior
to each due date prescribed by the Code for the payment of Post-Closing
Estimated Taxes for a Post-Closing Tax Period with respect to which the
Estimated Adjustments exceed the sum of the Estimated NOLs and the
Estimated Compensation Deductions, Buyer shall provide Seller
Subsidiary with preliminary calculations, and within 10 days prior to
each such due date, Buyer shall provide Seller Subsidiary with final
calculations (in each case, with reasonable supporting documentation),
of (a) the Post-Closing Estimated Taxes payable for the applicable
period and (b) the amount of such Taxes attributable to the Estimated
Adjustments, the Estimated NOLs and the Estimated Compensation
Deductions (the "Relevant Estimated Taxes"). For purposes of such
calculations, Buyer and Seller Subsidiary agree that (a) except with
respect to payments made in connection with extensions of time to file,
Buyer will use the annualized income method under Section 6655 of the
Code (and, where available, under any similar provision of state or
local Tax law) to the extent that Buyer reasonably determines that such
method would reduce the amount of Post-Closing Estimated Taxes payable
for any applicable period, and (b) Buyer's final calculations of the
Relevant Estimated Taxes will be determined with reference to Buyer's
actual U.S.
<PAGE>
8
federal Tax liability and an estimate of Buyer's state and local Tax
liability using the combined effective state and local Tax rate for the
Company and the Company Subsidiary in jurisdictions where they file on
a stand-alone basis, and the combined effective state and local Tax
rate of the Buyer Group in jurisdictions where the Company and the
Company Subsidiary file on a consolidated, combined or unitary basis
with other members of the Buyer Group, in each case calculated taking
into account the benefit of deducting state and local Taxes from
federal income Tax . Buyer and Seller Subsidiary agree to negotiate in
good faith to resolve any disputes with respect to the amounts of the
Estimated Adjustments, the Estimated NOLs and the Estimated
Compensation Deductions, and with respect to calculations of the
Post-Closing Estimated Taxes and the Relevant Estimated Taxes. In the
event that any disputes remain unresolved after such negotiations, then
for purposes of this Section 9.12(i), the determination of Seller
Subsidiary shall be final with respect to disputes relating to the
Estimated Adjustments, the Estimated NOLs and the Estimated
Compensation Deductions, and the determination of Buyer shall be final
with respect to all other matters relating to calculations of the
Post-Closing Estimated Taxes and the Relevant Estimated Taxes, provided
that Seller Subsidiary shall indemnify Buyer for interest and penalties
that are payable by Buyer (or any of its Subsidiaries) to the Internal
Revenue Service or other relevant Taxing authority and that are
attributable to a material error or omission in such a final
determination of Seller Subsidiary, and Buyer shall pay to Seller
Subsidiary interest at the "underpayment rate" (as defined in Section
6621 of the Code) on any overpayments that are made by Seller
Subsidiary to Buyer under this Section 9.12(i) that are attributable to
a material error or omission in such a final determination of Buyer
(which interest, for purposes of clarification, shall run from the date
of Seller Subsidiary's overpayment to Buyer to the date on which such
overpayment is reimbursed from Buyer to Seller Subsidiary or is
credited against other amounts owing from Seller Subsidiary to Buyer
under this Section 9.12). Within 7 days following its receipt of
Buyer's final calculations of Post-Closing Estimated Taxes and Relevant
Estimated Taxes for any applicable period (but in no event earlier than
3 days prior to the due date prescribed by the Code for the
Post-Closing Estimated Taxes to which such final calculations relate),
Seller Subsidiary shall remit payment to Buyer of the lesser of (a) the
Post-Closing Estimated Taxes and (b) the Relevant Estimated Taxes, as
determined hereunder for the applicable period. Payments by Buyer and
Seller Subsidiary pursuant to this Section 9.12(i) shall be taken into
account in determining amounts due to Buyer (as a reduction therein),
or amounts due from Buyer (as an addition thereto), under paragraph (f)
of this Section 9.12."
SECTION 19. NEW SECTION 9.12(K). A new Section 9.12(k) is
hereby added to read as follow:
"(k) If the Company Subsidiary's applications for a change in method of
accounting with respect to accounts receivable (to be effective
beginning with the 1998 taxable year
<PAGE>
9
of the Company Subsidiary) remain pending with the Internal Revenue
Service as of the Closing Date (the "Pending Applications"), then both
Seller Subsidiary and Buyer shall have the right to participate in the
conduct of all subsequent matters relating to the Pending Applications
(including, but not limited to, discussions and negotiations with the
Internal Revenue Service and the filing of revisions to the Pending
Applications to reflect the transactions contemplated by this
Agreement). In connection therewith, Seller Subsidiary and Buyer shall
keep each other reasonably informed of any developments relating to the
Pending Applications, and shall provide such cooperation as may be
reasonably requested by the other party (including, but not limited to,
providing copies of any correspondence received by or submitted to the
Internal Revenue Service, granting access to the accountants and other
professionals that were involved in the preparation of the Pending
Applications and executing powers of attorney to authorize the
designation of representatives selected by the other party). All final
decisions with respect to the Pending Applications shall be made by
Seller Subsidiary with the consent of Buyer (which consent shall not be
unreasonably withheld). Seller and Seller Subsidiary acknowledge that,
in the event that the Pending Applications are withdrawn, denied or
otherwise terminated after the Closing Date, Buyer shall have the
right, in its sole discretion, to file, or to cause the Company or the
Company Subsidiary to file, new applications for a change in the
Company Subsidiary's method of accounting for accounts receivable
(which new applications may or may not be based upon the same facts and
supporting information as the Pending Applications)."
SECTION 20. AMENDMENT TO SECTION 11.02(A)(V). Section
11.02(a)(v) is hereby amended by deleting the "." at the end of Section
11.02(a)(v) and replacing it with "; or".
<PAGE>
10
SECTION 21. NEW SECTION 11.02(A)(VI). Section 11.02(a) is
hereby amended by adding thereto a new Section 11.02(a)(vi) to read as follows:
"(vi) any Action, matter or claim (including, but not limited
to, medical professional liability) both (x) arising out of or relating
to the conduct or actions or failure to act prior to the Closing of Ms.
Elaine Giorgi while working for or on behalf of Seller, Seller
Subsidiary, the Company or any other subsidiary or affiliate of Seller
and (y) relating to any actual or alleged effect on or the state of the
health (including emotional well-being) of patients of the Company or
any subsidiary of the Company (whether or not any such Action, matter
or claim is pending as of the Closing); PROVIDED that Seller shall not
have any liability hereunder for (1) consequential, punitive, indirect,
special or incidental damages incurred by any Buyer Indemnified Party
(including, without limitation, additional economic losses incurred by
a Buyer Indemnified Party as a result of a change in industry
conditions or practice or in applicable law or regulation) other than
consequential, punitive, indirect, special or incidental damages
actually paid to any third party by such Buyer Indemnified Party, (2)
Losses related to patient counseling, testing and/or treatment programs
voluntarily offered by a Buyer Indemnified Party, solely after the
Closing Date, that are not approved by Seller, (3) except to the extent
such employees' services are requested by Seller, employee compensation
and overhead costs related to time spent by a Buyer Indemnified Party
and its employees in responding to, or in assisting Seller in its
management of, matters (other than Actions or claims) arising from Ms.
Giorgi's conduct and (4) employee compensation and overhead costs
related to time spent by a Buyer Indemnified Party and its employees
responding to any Action or claim related to Ms. Giorgi's conduct."
SECTION 22. AMENDMENT TO SECTION 11.03(A)(III). Section
11.03(a)(iii) is hereby amended by deleting "Assumed Liabilities" therefrom and
replacing it with "Assumed Non-U.S. Liabilities".
SECTION 23. AMENDMENT TO SECTION 12.02(B). (a) Section
12.02(b) is hereby amended by deleting the reference to "Section 6.02" therefrom
and replacing it with "Section 6.03".
(b) Section 12.02(b) is hereby further amended by deleting the
reference to "Section 6.11(e)" therefrom and replacing it with "Section
6.11(d)".
<PAGE>
11
SECTION 24. AMENDMENT TO SECTION 13.03. Section 13.03 is
hereby deleted in its entirety and replaced with a new Section 13.03 to read as
follows:
"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, that Buyer may assign its right to receive monetary
indemnification (but no other rights, including procedural rights or
rights to control, approve or participate in litigation or settlement
negotiations) under Article XI to a third party to the extent necessary
or desirable to obtain the Financing or any replacement financing
following the Closing 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 25. AMENDMENT TO EXHIBIT B. Exhibit B of the Agreement
is hereby deleted in its entirety and replaced with the Exhibit B containing the
following documents in the forms attached hereto:
Exhibit B-1: Category One Laboratory Data Access Agreement
Exhibit B-2: Category Three Laboratory Data Access Agreement
Exhibit B-3: Participation Agreement
Exhibit B-4: Encoder Letter Agreement
SECTION 26. AMENDMENT TO EXHIBIT C. Exhibit C of the Agreement
is hereby deleted in its entirety and replaced with the Exhibit C attached
hereto.
SECTION 27. AMENDMENT TO EXHIBIT E. Exhibit E of the Agreement
is hereby deleted in its entirety and replaced with the Exhibit E attached
hereto.
SECTION 28. NEW EXHIBIT F. A new Exhibit F to the Agreement is
hereby added, containing the following documents in the forms attached hereto:
Exhibit F-1: Copyright License Agreement
Exhibit F-2: Trademark License Agreement
Exhibit F-3: Copyright Assignment
Exhibit F-4: Patent Assignment
Exhibit F-5: Trademark Assignment
<PAGE>
12
Exhibit F-6: Trademark Assignment
Exhibit F-7: Trademark Assignment
Exhibit F-8: Trademark Assignment
Exhibit F-9: Trademark Assignment
SECTION 29. NEW EXHIBIT G. A new Exhibit G containing the
License Agreement to the Agreement is hereby added in the form of Exhibit G
attached hereto.
SECTION 30. INTERPRETATION. Seller and Buyer acknowledge that
earlier drafts of this Amendment contained proposed language that was not
included in this Amendment. Seller and Buyer agree that no evidentiary weight or
value regarding the intent of the parties hereto with respect to the
interpretation of the Agreement shall be attributed to the non-inclusion of such
language. After giving effect to this Amendment, all references in the Agreement
to the "date hereof", the "date of this Agreement" and any similar reference
shall continue to refer to February 9, 1999, unless otherwise expressly provided
in this Amendment.
SECTION 31. EFFECT ON AGREEMENT. Except as amended hereby, the
provisions of the Agreement are and shall remain in full force and effect.
SECTION 32. GOVERNING LAW. This Amendment 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.
<PAGE>
13
IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed as of the date first written above.
SMITHKLINE BEECHAM PLC,
By /s/ Joseph L. Harris
Name: Joseph L. Harris
Title: Senior Vice President
QUEST DIAGNOSTICS INCORPORATED,
By /s/ Kenneth W. Freeman
Name: Kenneth W. Freeman
Title: Chief Executive Officer
With respect to the amendments to
Articles IX, XI and XIII only,
SMITHKLINE BEECHAM CORPORATION,
By /s/ Joseph L. Harris
Name: Joseph L. Harris
Title: Senior Vice President
<PAGE>
Exhibit 5
NON-COMPETITION AGREEMENT dated as of August 16, 1999 (this
"AGREEMENT") between SMITHKLINE BEECHAM PLC, a public limited company organized
under the laws of England ("SELLER"), and QUEST DIAGNOSTICS INCORPORATED, a
Delaware corporation ("BUYER").
WHEREAS, the execution and delivery of this Agreement is a
condition to the obligations of Buyer and Seller under the Stock and Asset
Purchase Agreement dated as of February 9, 1999 (the "PURCHASE AGREEMENT"),
among Buyer, Seller and SmithKline Beecham Corporation, a Pennsylvania
corporation and an indirect wholly owned subsidiary of Seller ("SELLER
SUBSIDIARY"), pursuant to which Seller shall cause Seller Subsidiary to sell to
Buyer, and Buyer shall purchase from Seller Subsidiary, the Shares (capitalized
words or phrases used and not otherwise defined herein shall have the respective
meanings ascribed thereto in the Purchase Agreement; provided that for purposes
of this Agreement neither Buyer nor any of its subsidiaries shall be considered
an "Affiliate" of Seller) and shall sell to Buyer and shall cause the Seller
Entities to sell to Buyer, and Buyer shall purchase from Seller and the Seller
Entities, certain assets, and Buyer shall assume certain liabilities, all upon
the terms and subject to the conditions set forth in the Purchase Agreement;
WHEREAS, Seller acknowledges that its agreements and covenants
set forth herein are an integral part of the transactions between itself and
Seller Subsidiary, on the one hand, and Buyer, on the other hand, and that but
for such agreements and covenants, Buyer would not enter into such transactions;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, Buyer and Seller hereby
agree as follows:
ARTICLE I
COVENANTS OF THE PARTIES
SECTION 1.01. NON-COMPETITION. Seller covenants and agrees:
(a) For a period beginning on the Closing Date and ending on
the fifth anniversary thereof (the "RESTRICTED PERIOD"), except to the extent
permitted by paragraphs (b), (c), (d), (e) and (f) of this Section 1.01, without
the prior written consent of Buyer, none of Seller or any of its controlled
Affiliates shall, and Seller shall use commercially reasonable efforts to cause
each of its other Affiliates not to, engage, directly or indirectly, in any
business anywhere in the world that provides Clinical Laboratory
<PAGE>
2
Services, or, directly or indirectly, own an interest in, manage, operate,
control, or otherwise, directly or indirectly, engage in the ownership,
management, operation or control of, any Person that provides Clinical
Laboratory Services. For purposes of this Section 1.01, "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) and information services or providing to any unaffiliated
Person, in any manner, directly or indirectly, data or information programs,
services or products which substantially consists of laboratory data unless (i)
the utility of the program, service or product, from the point of view of a
reasonable user of such program, service or product, has been materially
enhanced by the inclusion of data sourced from Seller, its Affiliates or any
Third Party and (ii) such program, service or product does not include
laboratory data directly provided by Buyer, IX Company or their Affiliates.
(b) Notwithstanding the provisions of Section 1.01(a),
ownership of securities (i) having no more than five percent of the outstanding
voting power of any Person that provides Clinical Laboratory Services which is
listed on any national securities exchange or traded actively in the national
over-the-counter market or (ii) having less than twenty percent of the
outstanding voting power of any Person that is not publicly traded and has
annual revenues, together with its Affiliates, of less than $10 million from
provision of Clinical Laboratory Services shall not be deemed to be in violation
of Section 1.01(a).
(c) Notwithstanding the provisions of Section 1.01(a),
ownership by any employee benefit plan of Seller or its Affiliates in any
diversified index, mutual or pension fund managed by an independent investment
advisor, which fund in turn holds, directly or indirectly, securities in a
Person that provides Clinical Laboratory Services shall not be deemed a
violation of Section 1.01(a).
(d) Seller shall not be deemed to be in violation of Section
1.01(a) if during the Restricted Period Seller or any of its Affiliates
acquires, or Seller is acquired by, any diversified business that provides
Clinical Laboratory Services to non-affiliated Persons as long as (i) the
percentage of revenues of such business attributable to the provision of
Clinical Laboratory Services to non-affiliated Persons during the preceding
fiscal year represents less than 50% of such business' total revenues during
such period (based on such Person's latest financial statements) and (ii) if,
during the fiscal year preceding such acquisition, or any fiscal year during the
Restricted Period, the revenues attributable to the provision by Seller or any
of its Affiliates or any such Person (other than Buyer or any of its Affiliates)
of Clinical Laboratories Services to non-affiliated Persons exceed $50 million,
Seller promptly after the end of such fiscal year, notifies Buyer of such
occurrence and promptly, and in any event, within 18 months thereafter, ceases
(and all Affiliates of Seller (other than Buyer or any of its Affiliates) cease)
providing such Clinical Laboratory Services, either by selling the business or
assets generating such revenues to a third party or otherwise.
<PAGE>
3
(e) (i) In connection with a Participation Agreement dated as
of August __, 1999 between Seller and Buyer (the "PARTICIPATION AGREEMENT"), in
connection with the Closing under the Purchase Agreement, Seller has agreed to
organize a company ("IX COMPANY") which, at the time of formation of IX Company
(the "FORMATION DATE"), will be an Affiliate of Seller. For the purpose of this
Agreement, (A) provided that IX Company shall not perform clinical laboratory
testing, IX Company shall be deemed not to be an Affiliate of Seller or any of
its Affiliates, regardless of the percentage of ownership of IX Company held by
Seller or its Affiliates at any time, and (B) for the period ending on the
one-year anniversary of the date hereof, Seller's operation of any businesses
that are contributed to IX Company by Seller or an Affiliate of Seller pursuant
to the terms and conditions of the Participation Agreement and are described in
Section 3.01(a) thereof shall not be deemed to be in violation of Section
1.01(a).
(ii) The receipt by IX Company of consideration of any type
whatsoever received by IX Company or its Affiliates from the sale of its equity
securities, assets or programs, services and products shall not violate this
Agreement to the extent that the receipt of such consideration is permitted
under the terms of the Participation Agreement.
(f) Notwithstanding the provisions of Section 1.01(a), this
Section 1.01 shall not prohibit any of Seller and its Affiliates from (i) owning
equity interests in Healtheon Corporation, a Delaware corporation (to the extent
owned on the date hereof), diaDexus, LLC, a Delaware limited liability company
("DIADEXUS") (to the extent owned on the date hereof and any additional
investment that would not result in an increase in Seller's percentage equity
interest), and Careside, Inc., a Delaware corporation (not to exceed 10% of its
outstanding voting capital stock); (ii) conducting or having conducted on its
behalf the Studies (as such term is defined in the Clinical Trials Agreement),
assays and other Clinical Laboratory Services involving clinical trials which
Seller is permitted to conduct itself or have conducted on its behalf without
violating Section II of the Clinical Trials Agreement; (iii) subject to Section
7.09 of the Purchase Agreement, owning and operating all or any part of the
Non-U.S. Clinical Laboratories Business in the event and to the extent that,
pursuant to Section 7.09 of the Purchase Agreement, Buyer does not purchase all
the Other Assets, including without limitation the Clinical Trials Business;
(iv) performing their obligations in accordance with the Collaboration and
License Agreement with Incyte, Inc. and diaDexus dated September 2, 1997; (v)
developing, using, manufacturing and selling or otherwise distributing
diagnostic tests for screening patients for appropriate pharmaceutical and/or
vaccine products which are and/or will be manufactured by or for Seller or its
Affiliates; PROVIDED that the exception included in this clause (v) is for the
limited purpose of enhancing the marketability of Seller's and its Affiliates'
pharmaceutical and vaccine products and is not otherwise intended to diminish
Section 1.01 (E.G., neither Seller nor any of its Affiliates shall perform
clinical laboratory testing pursuant to the exception afforded by this clause
(v)); (vi) providing information products or services in any country (other than
the United States of America) in which Quest Diagnostics does not market and
sell competitive
<PAGE>
4
information products or services on a commercial basis (provided that neither
Seller nor any of its Affiliates shall perform clinical laboratory testing
pursuant to the exception afforded by this clause (vi)); (vii) continuing to
own, directly or indirectly, Seller's interest in the Mexican Joint Venture
pursuant to a separate letter agreement, dated as of the date hereof, so long as
the Mexican Joint Venture does not perform Clinical Laboratory Services on
specimens originating from outside Mexico; (viii) developing disease management,
outcomes research and other similar applications and pharmaceutical or disease
state identification or education products or services, or providing or
delivering to third parties or Seller or its Affiliates such products or
services which relate to any disease state category for which Seller or any of
its Affiliates is developing, marketing, co-marketing, distributing or selling a
pharmaceutical or vaccine product; PROVIDED, HOWEVER, that none of the foregoing
shall include the performance of clinical laboratory testing by or on behalf of
Seller or any of its Affiliates; (ix) owning equity interests in any Person in
an amount of up to $5,000,000 with respect to each individual investment so long
as Seller and its Affiliates do not own more than 20% of the outstanding equity
of such Person; (x) from the date of the Closing until the six-month anniversary
of the Formation Date, engaging in any activity in furtherance of the formation
of IX Company; (xi) receiving, by distribution or otherwise, any property from
IX Company which was initially acquired by IX Company in a manner permitted by
the terms of the Participation Agreement; (xii) receiving consideration of any
type whatsoever in exchange for equity securities of IX Company or all or
substantially all the assets of IX Company provided that the transaction or
transactions in which such consideration was received is permitted under the
terms of the Participation Agreement; and (xiii) providing information products
and services that include laboratory data to the extent permitted by the
Category One Data Access Agreement, dated as of the date hereof, between Buyer
and Seller, or the Category Three Data Access Agreement, dated as of the date
hereof, between Buyer and Seller, and, in the case of the Category Three Data
Access Agreement, only until the Closing Date.
(g) The Restricted Period shall be extended by the length of
any period during which Seller is in material breach of the terms of this
Section 1.01. Any extension shall be for the judicially determined period of
such breach or as the parties shall mutually agree.
(h) Seller acknowledges that the covenants of Seller set forth
in this Section 1.01 are an essential element of the transactions contemplated
by the Purchase Agreement and that, but for the agreement of Seller to comply
with these covenants, Buyer would not have entered into the Purchase Agreement.
Seller has independently consulted with its U.S. counsel and after such
consultation agrees that the covenants set forth in this Section 1.01 are
reasonable and proper.
SECTION 1.02. PAYMENT BY BUYER. Buyer covenants and agrees, at
the Closing, to deliver to an account designated by Seller by wire transfer in
immediately available funds $20,000,000.
<PAGE>
5
SECTION 1.03. CERTIFICATE SHOWING EXEMPTION FROM WITHHOLDING.
Seller shall deliver to Buyer duly completed and properly executed Internal
Revenue Service Forms 1001 and W-8BEN certifying that (i) Seller is the
beneficial owner of the payment referred to in Section 1.02, (ii) Seller is
qualified for benefits under the provisions of the Income Tax Treaty between the
United States and the United Kingdom and (iii) the payment referred to in
Section 1.02 is exempt from U.S. withholding tax.
SECTION 1.04. REMEDIES.
(a) In the event that this Agreement or any portion hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too great a period of time or over too great a
geographic area or range of activities, it shall be interpreted to extend only
over the maximum period of time, geographic area or range of activities as to
which it may be enforceable.
(b) Seller recognizes and acknowledges that in the event of
Seller's failure to comply with any of the covenants contained in this
Agreement, it may be impossible to measure in money the damages to Buyer or its
successor and that in the event of such failure, Buyer or its successors may not
have an adequate remedy at law. It is therefore agreed that Buyer or its
successor, in addition to any other rights or remedies which it may have, shall
be entitled to immediate injunctive relief to enforce such covenants, and that
if any action or proceeding is brought in equity to enforce the same, Seller
shall not urge, as a defense, that there is an adequate remedy at law.
(c) Seller agrees that the payment set forth in Section 1.02
shall not be used as evidence in determining the amount of monetary damages
owing to Buyer resulting from a breach of Section 1.01.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.01. INTERPRETATION. (a) The headings contained in
this Agreement and in the table of contents to this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(b) In the event of 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.
<PAGE>
6
(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". 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 and Sections shall be construed to refer to Articles and Sections of
this Agreement.
SECTION 2.02. AMENDMENTS. No amendment, modification or waiver
in respect of this Agreement shall be effective unless it shall be in writing
and signed by both parties hereto.
SECTION 2.03. ASSIGNMENT. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by Seller or Buyer
(except by operation of law in connection with a merger, or sale of
substantially all the assets, of Seller or Buyer). Any attempted assignment in
violation of this Section 2.03 shall be void.
SECTION 2.04. 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, other than the parties hereto and such assigns, any legal or equitable
rights hereunder.
SECTION 2.05. 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:
<PAGE>
7
(i) if to Buyer,
Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, NJ 07608
Attention: Raymond C. Marier
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Clare O'Brien; and
(ii) if to Seller or Seller Subsidiary,
SmithKline Beecham plc
One New Horizons Court
Middlesex, TW8 9EP
Brentford England
Attention: General Counsel
with copies to:
SmithKline Beecham Corporation
One Franklin Plaza
Philadelphia, PA 19102
Attention: U.S. General Counsel; and
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Susan Webster
SECTION 2.06. ATTORNEY FEES. A party in breach of this
Agreement shall, on demand, indemnify and hold harmless the other party for and
against all reasonable out-of-pocket expenses, including legal fees, incurred by
such 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.
<PAGE>
8
SECTION 2.07. 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 2.07; PROVIDED that receipt of copies of such
counterparts is confirmed.
SECTION 2.08. 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 2.09. CONSENT TO JURISDICTION. Each of the parties
hereto irrevocably submits to the exclusive jurisdiction of (a) the 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. Each of Buyer and Seller agrees to
commence any action, suit or proceeding relating hereto either in a Federal
Court for the Southern District of New York or in any such New York state court.
Each of the parties hereto 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 2.09. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby 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 2.10. WAIVER OF JURY TRIAL. Each of the parties hereto
hereby waives to the fullest extent permitted by applicable law, any right it
may have to a trial by jury in respect to any litigation directly or indirectly
arising out of, under or in connection with this Agreement. Each of the parties
hereto (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, by, among other things, the mutual waivers and
certifications in this Section 2.10.
<PAGE>
9
SECTION 2.11. SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 2.12. 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.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
QUEST DIAGNOSTICS INCORPORATED
By: /s/ Kenneth W. Freeman
Name: Kenneth W. Freeman
Title: Chief Executive Officer
SMITHKLINE BEECHAM PLC
By: /s/ Donald F. Parman
Name: Donald F. Parman
Title: Authorized Signatory
<PAGE>
Exhibit 6
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of August 16, 1999 (this
"AGREEMENT"), between , SMITHKLINE BEECHAM PLC public limited company organized
under the laws of England (the "STOCKHOLDER"), and QUEST DIAGNOSTICS
INCORPORATED, a Delaware corporation (the "COMPANY").
WHEREAS, the execution and delivery of this Agreement is a
condition to the obligations of the Company and the Stockholder under the Stock
and Asset Purchase Agreement dated as of February 9, 1999, among the Company,
the Stockholder and SmithKline Beecham Corporation, a Pennsylvania corporation
and an indirect wholly owned subsidiary of the Stockholder (the "PURCHASE
AGREEMENT"), pursuant to which the Stockholder shall cause Seller Subsidiary (as
defined in the Purchase Agreement) to sell to the Company, and the Company shall
purchase from Seller Subsidiary, the Shares (as defined in the Purchase
Agreement) and shall sell to the Company and shall cause the Seller Entities (as
defined in the Purchase Agreement) to sell to the Company, and the Company shall
purchase from the Stockholder and the Seller Entities, certain assets, and the
Company shall assume certain liabilities, all upon the terms and subject to the
conditions set forth in the Purchase Agreement;
WHEREAS, upon consummation of the transaction contemplated by
the Purchase Agreement, the Stockholder will beneficially own 12,564,336 shares
of the common stock of the Company, par value $0.01 per share (together with any
common stock of the Company issued as a dividend or other distribution with
respect thereto, or in exchange therefor, or in replacement thereof, the
"COMPANY COMMON STOCK"); and
WHEREAS, the Company and the Stockholder now wish to enter
into this Agreement to set forth their understanding as to the matters set forth
herein with respect to, among other things, representation on the Company's
Board of Directors (the "BOARD") and the holding, acquisition and transfer of
Company Common Stock by the Stockholder and its Affiliates (as defined below);
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, the Company and the
Stockholder hereby agree as follows:
<PAGE>
2
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. (a) As used in this Agreement, the
following terms shall have the following meanings:
"AFFILIATE" has the meaning set forth in Rule 12b-2, as in
effect on the date hereof, under the Exchange Act.
"BENEFICIALLY OWN" has the meaning set forth in Rule 13d-3, as
in effect on the date hereof, under the Exchange Act.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which banks are required or authorized by law to be closed in The
City of New York.
"BUYOUT TRANSACTION" means a tender offer, merger, sale of all
or substantially all of the Company's assets or any similar transaction that
offers each holder of Company Common Stock (other than, if applicable, the
Person proposing such transaction) the opportunity to dispose of all Company
Common Stock beneficially owned by each such holder or otherwise contemplates
the acquisition of all (but not less than all) Company Common Stock beneficially
owned by each such holder.
"CLOSING" has the meaning set forth in the Purchase Agreement.
"CLOSING DATE" has the meaning set forth in the Purchase
Agreement.
"COMMISSION" means the U.S. Securities and Exchange Commission
and any successor agency.
"DIRECTOR" means a member of the Board.
"EMPLOYEE PLAN" means any equity incentive plan, agreement,
bonus, award, stock purchase plan, stock option plan or other stock arrangement
with respect to any directors, officers or other employees of the Company.
"EXCHANGE ACT" means the United States Securities Exchange Act
of 1934, as amended.
<PAGE>
3
"GOVERNMENTAL ENTITY" means 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.
"GROUP" has the meaning set forth in Rule 13d-5, as in effect
on the date hereof, under the Exchange Act.
"HOLDER" means the Stockholder, the Initial Holder and any
Subsidiary Transferee.
"INDEPENDENT DIRECTOR" means a Director who is not, at the
time of determination, (i) a director, officer, employee or Affiliate of any
Holder or (ii) an officer or employee of the Company.
"INITIAL HOLDER" means the Stockholder.
"PERSON" means any individual, firm, corporation, partnership,
limited partnership, limited liability company, association, trust,
unincorporated organization or other entity, as well as any syndicate or group
that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.
"REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act and the declaration or
ordering of effectiveness of such registration statement or document.
"REGISTRABLE STOCK" means the Stockholder Shares and any
securities issued or issuable with respect to any Stockholder Shares by way of
conversion, exchange, replacement, stock dividend, stock split or other
distribution or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. For purposes of this
Agreement, any Registrable Stock shall cease to be Registrable Stock when (i) a
registration statement covering such Registrable Stock has been declared
effective and such Registrable Stock has been disposed of pursuant to such
effective registration statement, (ii) such Registrable Stock is sold by a
Person in a transaction in which the rights under the provisions of this
Agreement are not assigned or (iii) such Registrable Stock is sold pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A) under
the 1933 Act without registration under the 1933 Act.
"SECURITIES ACT" means the United States Securities Act of
1933, as amended.
"STOCKHOLDER DIRECTOR" means a Director designated by the
Stockholder pursuant to this Agreement.
<PAGE>
4
"STOCKHOLDER SHARES" means Company Common Stock now or
hereafter beneficially owned by the Stockholder, the Initial Holder or a
Subsidiary Transferee and any securities issued or issuable with respect to any
such Common Stock by way of conversion, exchange, replacement, stock dividend,
stock split or other distribution or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"THIRD PARTY OFFER" means a bona fide offer to enter into a
Buyout Transaction by a Person other than the Stockholder or any of its
Affiliates or any other Person acting on behalf of the Stockholder or any of its
Affiliates that does not treat the Stockholder or any of its Affiliates
differently than other holders of Company Common Stock and that is approved by
two-thirds of the Independent Directors.
(b) The following terms have the meanings set forth in the
Sections set forth below:
Term Location
---- --------
Agreement................................................. Preamble
Board..................................................... Recitals
Company................................................... Preamble
Company Common Stock...................................... Recitals
Initial Restriction Period................................ ss.4.02(a)
Initiating Holders........................................ ss.5.03(a)
Purchase Agreement........................................ Recitals
Selling Stockholders...................................... ss.4.05
Shelf Registration........................................ ss.5.05(a)
Standstill Period......................................... ss.4.01(a)
Stockholder............................................... Preamble
Subsidiary Transferee..................................... ss.4.02(b)
Transfer.................................................. ss.4.02(a)
Transfer Notice........................................... ss.4.05(a)
<PAGE>
5
ARTICLE II
GOVERNANCE
SECTION 2.01. INITIAL BOARD REPRESENTATION. As soon as
practicable following the Closing, the Company will (a) take such actions as may
be necessary to increase the size of the Board to nine, and (b) exercise all
authority to fill the two vacancies thereby created in two classes of Directors
with William R. Grant and John O. Parker. William R. Grant is an Independent
Director.
SECTION 2.02. CONTINUING BOARD REPRESENTATION. (a) As long as
the Holders, in the aggregate, own Stockholder Shares constituting at least 20%
of the outstanding Company Common Stock, the parties hereto shall exercise all
authority under applicable law to cause any slate of Directors presented to the
stockholders of the Company for election to the Board to consist of such
nominees that, if elected, would result in a Board that included two, and only
two, individuals designated by the Stockholder, at least one of whom will be an
Independent Director.
(b) As long as the Holders, in the aggregate, own Stockholder
Shares constituting at least 10% but less than 20% of the outstanding Company
Common Stock, the parties hereto shall exercise all authority under applicable
law to cause any slate of Directors presented to the stockholders of the Company
for election to the Board to consist of such nominees that, if elected, would
result in a Board that included one, and only one, individual designated by the
Stockholder. Such individual to be designated by the Stockholder is not required
to be an Independent Director.
(c) If the Holders, in the aggregate, own Stockholder Shares
constituting less than 10% of the outstanding Company Common Stock, the Company
shall have no obligation pursuant to this Agreement to cause any slate of
Directors presented to the stockholders of the Company for election to the Board
to include any nominee designated by the Stockholder.
(d) As long as the Stockholder has the right, pursuant to
Section 2.02(a), to designate two Directors, to the extent possible, the
Stockholder Directors shall be elected to different classes. Initially, John O.
Parker will be elected to the class of Directors which will be up for reelection
in 2000, and William R. Grant will be elected to the class of Directors which
will be up for reelection in 2001.
(e) As long as the Holders, in the aggregate, own Stockholder
Shares constituting at least 20% of the outstanding Company Common Stock, the
Board shall not consist of more than ten Directors UNLESS the Stockholder is
given an opportunity to designate one additional Independent Director to the
Board; PROVIDED that the Company shall not be obligated to offer such
opportunity to the Stockholder if (i) United Kingdom generally accepted
accounting principles and practices as in effect at the time of determination do
not require the
<PAGE>
6
Stockholder to have an additional Director on the Board to maintain equity
accounting for its interest in the Company or (ii) at any time between the date
of this Agreement and the time of determination, the Stockholder and its
Affiliates have ceased to own Stockholder Shares constituting at least 20% of
the outstanding Company Common Stock.
SECTION 2.03. RESIGNATIONS AND REPLACEMENTS. Subject to
Section 2.02, Section 2.03(b) and Section 2.05, if a Stockholder Director ceases
to serve as a Director for any reason, the vacancy created by such Director
ceasing to serve shall be filled by the affirmative vote of a majority of the
remaining Directors then in office with an individual designated by the
Stockholder.
(b) In the event that at any time the number of Stockholder
Directors on the Board is greater than the number of Directors that the
Stockholder has the right to designate pursuant to Section 2.02, then that
number of Stockholder Directors shall be deemed to have resigned immediately
upon the occurrence of such event such that the remaining number of Stockholder
Directors, if any, conform to the provisions of this Agreement, and the
Stockholder shall take all action to promptly effect such resignation.
SECTION 2.04. COMMITTEES. As long as the Holders, in the
aggregate, own at least 10% of the outstanding Company Common Stock, the Company
shall exercise all authority to cause the Board to designate one Stockholder
Director to serve as a member of each committee of the Board, other than the
Executive Committee, to the same extent, and on the same basis, as the other
Directors; PROVIDED, HOWEVER, that the Stockholder Director appointed to serve
on the Audit and Finance Committee shall be an Independent Director, and the
Board shall not be required to designate a Stockholder Director to serve as a
member of the Audit and Finance Committee at any time that there is no
Stockholder Director who is an Independent Director; and PROVIDED, FURTHER, that
if any applicable law or regulation of the New York Stock Exchange shall
prohibit the Board from appointing the Stockholder Director who is not an
Independent Director to serve on any committee, at any time there is no
Stockholder Director who is an Independent Director, the Board shall not be
required to appoint any Stockholder Director to serve on such committee.
SECTION 2.05. APPROVAL OF DIRECTOR NOMINEES. Any individual
designated by the Stockholder pursuant to Sections 2.01, 2.02 or 2.03, shall be
reasonably acceptable to the Company.
SECTION 2.06. NO VOTING TRUST. This Agreement does not create
or constitute, and shall not be construed as creating or constituting, a voting
trust agreement under the Delaware General Corporation Law or any other
applicable corporation law.
<PAGE>
7
SECTION 2.07. REINSTATEMENT. If the Standstill Period is
reinstated pursuant to Section 4.01(b), the terms of this Article II and all
other terms of this Agreement also shall be reinstated.
ARTICLE III
VOTING RIGHTS AND APPRAISAL RIGHTS
SECTION 3.01. VOTING RESTRICTIONS. (a) During the Standstill
Period (as defined in Article IV), the Stockholder shall, and shall cause its
Affiliates to, (i) so long as the Board includes at least one Stockholder
Director, vote all of their Company Common Stock in favor of nominees or
Directors designated by the Board, or any committee thereof, not in violation of
Article II and (ii) on votes relating to other matters, either, in Stockholder's
sole discretion, (x) vote all of their shares of Company Common Stock as
recommended by the Board or (y) in proportion to the votes cast with respect to
the shares of Company Common Stock not owned by the Stockholder and its
Affiliates.
(b) Notwithstanding Section 3.01(a) and except as provided in
Section 4.04, the Stockholder and its Affiliates may, in connection with any
required vote of the Company's stockholders, vote their shares of Company Common
Stock at their discretion with respect to (i) any amendments to the Company's
Restated Certificate of Incorporation, (ii) any recapitalization, restructuring
or similar transaction or series of transactions involving the Company, (iii)
any dissolution or complete or partial liquidation, or similar arrangement, of
the Company, (iv) any merger, consolidation or other business combination of the
Company, (v) any issuance of any shares of Company Common Stock, or (vi) any
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company to any Person, which, in the case
of clause (ii), (iv) or (v), results in any one Person or Group of Persons
becoming the beneficial owner, directly or indirectly, of more than 50% of the
outstanding Company Common Stock or, in the case of clause (i), either results
in any one Person or Group of Persons becoming the beneficial owner, directly or
indirectly, of more than 50% of the outstanding Company Common Stock or, in any
way, affects the Holders adversely in a manner different from the other holders
of Company Common Stock.
SECTION 3.02. APPRAISAL RIGHTS. The Stockholder and its
Affiliates shall not exercise any appraisal or dissenters' rights they may
otherwise have under Delaware General Corporation Law or otherwise as a result
of any of the transactions described in Section 3.01(b).
<PAGE>
8
ARTICLE IV
STANDSTILL PROVISIONS
SECTION 4.01. STANDSTILL PERIOD. (a) The "STANDSTILL PERIOD"
shall mean the period beginning on the Closing Date and continuing until the
earlier of (i) the tenth anniversary of the Closing Date and (ii) the date on
which the Stockholder and its Affiliates, in the aggregate, beneficially own
less than 10% of the outstanding Company Common Stock.
(b) In the event the Standstill Period is discontinued
pursuant to Section 4.01(a)(ii), the Standstill Period shall be reinstated if,
prior to the occurrence of the event described in Section 4.01(a)(i), the
Stockholder and its Affiliates, in the aggregate, beneficially own 10% or more
of the outstanding Company Common Stock. Notwithstanding the foregoing, in no
event shall the Standstill Period continue past the tenth anniversary of the
Closing Date.
SECTION 4.02. TRANSFER RESTRICTIONS. (a) Beginning on the
Closing Date and continuing for 18 months thereafter (the "INITIAL RESTRICTION
PERIOD"), the Stockholder shall not, and shall cause its Affiliates not to,
directly or indirectly, sell, transfer, assign, pledge, hypothecate or otherwise
dispose of ("TRANSFER") any shares of Company Common Stock except (i) to a
wholly owned subsidiary of the Stockholder that expressly assumes the
Stockholder's obligations under this Agreement relating to such Company Common
Stock (a "SUBSIDIARY TRANSFEREE") or to the Stockholder, (ii) pursuant to the
incidental registration rights provided for in Section 5.04 or (iii) pursuant to
a Third Party Offer; PROVIDED, HOWEVER, that no rights under this Agreement
shall Transfer to any transferee of Company Stock pursuant to Sections
4.02(a)(ii) or 4.02(a)(iii).
(b) Following the Initial Restriction Period, for so long as
the Standstill Period is in effect, the Stockholder shall not, and shall cause
its Affiliates not to, Transfer shares of Company Common Stock except (i) with
the prior approval of a majority of the Independent Directors and in accordance
with the provisions of Section 4.05, (ii) pursuant to a bona fide public
offering registered under the Securities Act in which the Holders shall use
commercially reasonable efforts to (x) effect as wide a distribution of such
Company Common Stock as is reasonably practicable and (y) prevent any Person or
Group from acquiring pursuant to such offering beneficial ownership of Company
Common Stock representing in the aggregate 5% or more of the outstanding Company
Common Stock, (iii) pursuant to Rule 144 under the Securities Act (excluding any
Transfer of shares of Company Common Stock under Rule 144A), (iv) to a Person or
Group that is permitted to file a Schedule 13G under the Exchange Act and that,
after giving effect to such Transfer, would beneficially own Company Common
Stock representing in the aggregate less than 5% of the outstanding Company
Common Stock or (v) in any transaction expressly permitted by Section
4.02(a)(i), 4.02(a)(ii) or 4.02(a)(iii); PROVIDED, HOWEVER, that no
<PAGE>
9
rights under this Agreement shall Transfer to any transferee of Company Stock
pursuant to Sections 4.02(a)(ii), 4.02(a)(iii), 4.02(b)(i), 4.02(b)(ii),
4.02(b)(iii) or 4.02(b)(iv).
(c) The Stockholder agrees that it will not Transfer its
interests in any Initial Holder or Subsidiary Transferee unless prior thereto
the Company Common Stock held by such entity is transferred to the Stockholder
or one or more Subsidiary Transferees; PROVIDED, HOWEVER, that any transfer or
assignment by operation of law in connection with any merger of the Stockholder
or the sale of all or substantially all the Stockholder's assets shall not be
deemed a breach of this Section 4.02(c).
SECTION 4.03. ACQUISITION OF ADDITIONAL SHARES; OTHER
RESTRICTIONS. During the Standstill Period, except with the prior approval of a
majority of the Independent Directors, the Stockholder shall not, directly or
indirectly, and shall cause its Affiliates not to, directly or indirectly:
(a) acquire, announce an intention to acquire, offer to
acquire, or enter into any agreement, arrangement or undertaking of any kind the
purpose of which is to acquire, by purchase, exchange or otherwise, (i) any
shares of Company Common Stock (other than pursuant to any Employee Plan), if
the effect of such acquisition would be to increase the number of shares of
Company Common Stock beneficially owned by the Stockholder and its Affiliates,
in the aggregate, to an amount representing more than 29.5% of the outstanding
Company Common Stock or (ii) any other security convertible into, or any option,
warrant or right to acquire, Company Common Stock (other than pursuant to any
Employee Plan) or (iii) all or substantially all of the assets of the Company or
any of its Affiliates, PROVIDED that (x) Sections 4.03(a)(i) and (ii) shall not
be applicable if the aggregate percentage of outstanding Company Common Stock is
increased solely as a result of corporate action taken by the Company and not
caused by any action taken by the Stockholder or any of its Affiliates and (y)
the ownership by any employee benefit plan of the Stockholder or its Affiliates
in any diversified index, mutual or pension fund managed by an independent
investment advisor, which fund in turn holds, directly or indirectly, Company
Common Stock shall not be deemed to be a breach of Section 4.03(a)(i) if not
more than 5% of such fund's assets are comprised of Company Common Stock.
(b) Solicit, or participate in any solicitation of, proxies
with respect to any Company Common Stock, or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A of the Exchange Act)
in opposition to any matter that has been recommended by a majority of the
Independent Directors or in favor of any matter that has not been approved by a
majority of the Independent Directors, or that is not a Third Party Offer.
(c) Propose or otherwise solicit stockholders of the Company
for the approval of one or more stockholder proposals, seek or solicit support
for (whether publicly or privately) any written consent of stockholders of the
Company, attempt to call a special meeting of
<PAGE>
10
stockholders (except with the approval of a majority of the Independent
Directors), nominate or attempt to nominate any Person for election as a
Director (except in accordance with Article II), or seek the removal or
resignation of any Director (other than a Stockholder Director) (except in
accordance with Article II), in each case in opposition to any matter that has
been recommended by a majority of the Independent Directors (and such
recommendation has not been revoked or withdrawn) or in favor of any matter that
has not been approved by a majority of the Independent Directors, or that is not
a Third Party Offer.
(d) Deposit any Company Common Stock in a voting trust or
similar agreement or subject any Company Common Stock to any arrangement or
agreement with respect to the voting of such Company Common Stock; PROVIDED,
HOWEVER, that this Section 4.03 shall not prohibit any such arrangement solely
among Stockholder and any of its wholly-owned subsidiaries.
(e) Take any action to form, join or in any way
participate in any partnership, limited partnership, syndicate or other Group
with respect to Company Common Stock or otherwise act in concert with any Person
for the purpose of circumventing the provisions or purposes of this Agreement.
(f) Propose (or publicly announce or otherwise disclose
an intention to propose), solicit, offer, seek to effect, negotiate with or
provide any confidential information relating to the Company or its business to
any other Person with respect to, any tender or exchange offer, merger,
consolidation, share exchange, business combination, restructuring,
recapitalization or similar transaction involving the Company; PROVIDED, that
nothing set forth in this Section 4.03(f) shall prohibit the Stockholder from
soliciting, offering, seeking to effect and negotiating with any Person with
respect to Transfers of Company Common Stock otherwise permitted by this Article
IV; PROVIDED FURTHER, that in so doing the Stockholder shall not (x) issue any
press release or otherwise make any public statements (other than statements
made in response to any request by any Person for confirmation by the
Stockholder or any of its Affiliates of information contained in any statement
on Schedule 13D under the Exchange Act) with respect to such action (PROVIDED
that the Stockholder may, and may permit its Affiliates to, make any statement
required by applicable law, including without limitation, the amendment of any
statement on Schedule 13D under the Exchange Act); PROVIDED, HOWEVER, that in
doing so Stockholder shall not provide any confidential information relating to
the Company or its business to any such Person, and; PROVIDED, FURTHER, that
nothing in this Section 4.04(f), shall apply to discussions between or among
officers, employees or agents of Stockholder and the Stockholder Directors.
(g) Take any other action to seek control (as such term
is defined under Rule 12b-2 of the Exchange Act) of the Company.
<PAGE>
11
(h) Make or in any way advance any request or proposal to
amend, modify or waive any provision of this Agreement except in a nonpublic and
confidential manner.
(i) Announce an intention to do, or solicit, assist,
prompt, induce or attempt to induce any Person to do, any of the actions
restricted or prohibited under subparagraphs (a) through (h) above.
Notwithstanding the restrictions contained in this Section
4.03, none of actions taken by any Stockholder Director as a member of the Board
pursuant to such Person's responsibilities in such capacity, the exercise by the
Stockholder of its voting rights in accordance with Section 3.01 with respect to
any Company Common Stock it beneficially owns, or actions taken by the
Stockholder in accordance with Section 4.04 shall be deemed to violate this
Section 4.03.
SECTION 4.04. THIRD PARTY OFFERS. (a) In the event the Company
becomes the subject of a Third Party Offer, then the Stockholder and its
Affiliates shall promptly and in any event within ten days after the Stockholder
receives notice of such Third Party Offer (whether as a result of the public
announcement thereof or otherwise), either (i) make a BONA FIDE offer to enter
into a Buyout Transaction with currently realizable value that is at least as
great as that of the Third Party Offer and otherwise with terms substantially
the same as the Third Party Offer or (ii) be obligated to, and, upon request by
a majority of the Independent Directors, confirm in writing that they will,
support such Third Party Offer by voting in favor of such Third Party Offer or
by tendering their shares of Company Common Stock pursuant to the Third Party
Offer, or both, as applicable.
(b) If the Company becomes subject of another Third Party
Offer that provides for greater currently realizable value to the Company's
stockholders than any previously proposed Third Party Offer, the Stockholder and
its Affiliates shall have the same rights and obligations with respect to such
other Third Party Offer as set forth in Section 4.04(a).
(c) In the event the Company becomes the subject of a
Buyout Transaction that is not a Third Party Offer but that is approved by a
majority of the Independent Directors, the Stockholder and its Affiliates shall
be permitted to support such Buyout Transaction, vote in favor of such Buyout
Transaction or tender or sell Company Common Stock to the Person making such
Buyout Transaction.
(d) In the event the Company becomes the subject of a
Buyout Transaction that is not a Third Party Offer and that is not approved by a
majority of the Independent Directors, the Stockholder shall not, and shall
cause the other Holders and its controlled Affiliates not to, support such
Buyout Transaction, vote in favor of such Buyout Transaction or tender or sell
Company Common Stock to the Person making such Buyout Transaction.
<PAGE>
12
SECTION 4.05. RIGHT OF FIRST REFUSAL. Prior to any Transfer of
shares of Company Common Stock pursuant to Section 4.02(b)(i), the Holder (a
"SELLING STOCKHOLDER") shall give the Company the opportunity to purchase, or
designate an alternative purchaser of such Company Common Stock in the following
manner:
(a) The Selling Stockholder shall give to the Company
written notice (the "TRANSFER Notice") of the proposed Transfer, specifying the
proposed transferee, the number of shares of Company Common Stock proposed to be
disposed of, the proposed consideration to be received in exchange therefor, and
the other material terms of the proposed Transfer.
(b) The Company shall have the right, exercisable by
written notice given to such Selling Stockholder within 10 Business Days after
receipt of such Transfer Notice, to purchase (or to cause another Person
designated by the Company to purchase) all, but not less than all, of the
Company Common Stock specified in such Transfer Notice at the purchase price and
on the other terms set forth therein. If the consideration specified in the
Transfer Notice includes any property other than cash, such purchase price shall
be deemed to be the amount of any cash included as part of such consideration
plus the value (as jointly determined by internationally recognized investment
banking firms selected by each of the Selling Stockholder and the Company or, in
the event such firms are unable to agree, a third internationally recognized
investment banking firm to be selected by the first two such firms) of such
other property included in such consideration, and the date of which the Company
must exercise its right of first refusal pursuant to this Section 4.05 shall be
extended until five Business Days after the determination of the value of
property included in the consideration.
(c) If the Company exercises its right of first refusal
pursuant to this Section 4.05, the closing of the purchase of the Company Common
Stock with respect to which such right has been exercised shall take place
within five Business Days after the Company gives notice of such exercise or
five Business Days after the determination of the value of property included in
the consideration, as applicable; PROVIDED that if any approval of or notice to
any Governmental Entity is required in connection with such purchase of Company
Common Stock, the Selling Stockholder and the Company shall use all reasonable
effort to obtain such approvals or to provide such notices and the closing shall
take place within five Business Days after receipt of the last such approval and
expiration of any required waiting periods. If the Company does not exercise its
right of first refusal pursuant to this Section 4.05 within the time specified
for such exercise, the Selling Stockholder shall be free during the 90-day
period following the expiration of such time for exercise to sell the Company
Common Stock specified in such Transfer Notice to the Person specified therein
for the consideration (or at any price in excess thereof) and on substantially
the same terms (or on other terms more favorable to the Selling Stockholders)
specified therein; PROVIDED, HOWEVER, that if the Selling Stockholders have
entered
<PAGE>
13
into written agreement to sell such Common Stock prior to the expiration of such
90-day period, the closing of such sale may occur within 90 days thereafter.
SECTION 4.06. ADDITIONAL SHARES. All shares of Company Common
Stock acquired pursuant to this Article IV or as a result of a recapitalization
of the Company or any other action taken by the Company, shall be subject to all
of the terms, covenants and conditions of this Agreement.
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.01. RESTRICTIVE LEGEND. (a) Each certificate
representing shares of Registrable Stock shall, except as otherwise provided in
this Section 5.01 or in Section 5.02, be stamped or otherwise imprinted with
legends substantially in the following form:
(i) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE RESTRICTIONS ON DISPOSITION AND OTHER
RESTRICTIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF
JULY 2, 1999, BETWEEN SMITHKLINE BEECHAM PLC AND
QUEST DIAGNOSTICS INCORPORATED."; and
(ii) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS THEY HAVE BEEN REGISTERED UNDER THAT ACT OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE."
(b) The Company shall, at the request of the Holder,
remove from each certificate evidencing Stockholder Shares transferred in
compliance with the terms of Section 4.02 and with respect to which no rights
under this Agreement shall transfer, the legend described in Section 5.01(a)(i),
and shall remove from each certificate evidencing Stockholder Shares the legend
described in Section 5.01(a)(ii) if in the opinion of counsel satisfactory to
the Company the securities evidenced thereby may be publicly sold without
registration under the Securities Act.
SECTION 5.02. NOTICE OF PROPOSED TRANSFER. Prior to any
proposed transfer of any shares of Registrable Stock (other than to a Subsidiary
Transferee or pursuant to a Third
<PAGE>
14
Party Offer or under the circumstances described in Sections 5.03, 5.04 or
5.05), the holder thereof shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel satisfactory to the Company to the effect that the
proposed transfer may be effected without registration under the Securities Act,
whereupon the holder of such Registrable Stock shall be entitled to transfer
such Registrable Stock in accordance with the terms of its notice, subject in
any event to the restrictions in Article IV; PROVIDED, HOWEVER, that no such
opinion of counsel shall be required for a transfer to one or more partners of
the transferor (in the case of a transferor that is a partnership) or to an
Affiliated corporation (in the case of a transferor that is a corporation),
subject in any event to the restrictions in Article IV. Each certificate for
Registrable Stock transferred as above provided shall bear the legend set forth
in Section 5.01(a)(ii), except that such certificate shall not bear such legend
if (i) such transfer is in accordance with the provisions of Rule 144 of the
Securities Act (or any other rule permitting public sale without registration
under the Securities Act) or (ii) the opinion of counsel referred to above is to
the further effect that the transferee and any subsequent transferee (other than
an Affiliate of the Company) would be entitled to transfer such securities in a
public sale without registration under the Securities Act. The restrictions
provided for in this Section 5.02 shall not apply to securities that are not
required to bear the legend prescribed by Section 5.01(a)(ii) in accordance with
the provisions of Section 5.01.
SECTION 5.03. REQUEST FOR REGISTRATION. (a) On and after the
expiration of the Initial Restriction Period, any Holder or Holders (the
"INITIATING HOLDERS") may request in a written notice that the Company file a
registration statement under the Securities Act (or a similar document pursuant
to any other statute then in effect corresponding to the Securities Act)
covering the registration of any or all Registrable Stock held by such
Initiating Holders in the manner specified in such notice, provided that there
must be included in such registration Registrable Stock having a minimum value
of $50,000,000 (based on the current market price of such Registrable Stock).
Following receipt of any notice under this Section 5.03 the Company shall use
its best efforts to cause to be registered under the Securities Act all
Registrable Stock that the Initiating Holders have requested be registered in
accordance with the manner of disposition specified in such notice by the
Initiating Holders.
(b) If the Initiating Holders intend to have the
Registrable Stock distributed by means of an underwritten offering, the Holders
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters. Such underwriter or underwriters shall be an
internationally recognized investment banking firm selected by the Holders and
approved by the Company, which approval shall not be unreasonably withheld;
PROVIDED, that (i) all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holders of
Registrable Stock, (ii) any or all of the conditions precedent to the
obligations
<PAGE>
15
of such underwriters under such underwriting agreement shall be conditions
precedent to the obligations of such Holders of Registrable Stock, and (iii) no
Holder shall be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Holder, the Registrable Stock of such
Holder and such Holder's intended method of distribution and any other
representations required by law or reasonably required by the underwriter. If
any Holder of Registrable Stock disapproves of the terms of the underwriting,
such Holder may elect to withdraw all its Registrable Stock by written notice to
the Company, the managing underwriter and the Initiating Holders. The securities
so withdrawn shall also be withdrawn from registration.
(c) Notwithstanding any provision of this Agreement to the
contrary,
(i) the Company shall not be required to effect a registration
pursuant to this Section 5.03 during the period starting with the date
of filing by the Company of, and ending on a date 120 days following
the effective date of, a registration statement pertaining to a public
offering of securities for the account of the Company or on behalf of
the selling stockholders under any other registration rights agreement
which the Holders have been entitled to join pursuant to Section 5.04;
PROVIDED, that the Company shall actively employ in good faith all
reasonable efforts to cause such registration statement to become
effective as soon as possible;
(ii) if the Company shall furnish to such Holders a
certificate signed by the president of the Company stating that in the
good faith opinion of the Board such registration would interfere with
any material transaction then being pursued by the Company, then the
Company's obligation to use all reasonable efforts to file a
registration statement shall be deferred for a period not to exceed 60
days;
(iii) the Company shall not be required to effect a
registration pursuant to this Section 5.03 if the Registrable Stock
requested by all Holders to be registered pursuant to such registration
are included in, and eligible for sale under, the Shelf Registration
(as defined below); and
(iv) the Company shall not be required to effect a
registration pursuant to this Section 5.03 more than one time in any
twelve-month period or at any time when a registration statement
pursuant to Section 5.05 is in effect.
(d) The Company shall not be obligated to effect and pay
for more than four registrations pursuant to this Section 5.03; PROVIDED, that a
registration requested pursuant to this Section 5.03 shall not be deemed to have
been effected for purposes of this Section 5.03(d) unless (i) it has been
declared effective by the Commission, (ii) it has remained effective for the
period set forth in Section 5.06(a) and (iii) the offering of Registrable Stock
pursuant to such registration is not subject to any stop order, injunction or
other order or requirement of the
<PAGE>
16
Commission (other than any such stop order, injunction, or other requirement of
the Commission prompted by any act or omission of Holders of Registrable Stock).
SECTION 5.04. INCIDENTAL REGISTRATION. (a) Subject to Section
5.09, if at any time the Company determines that it shall file a registration
statement under the Exchange Act for the registration of Company Common Stock
(other than a registration statement on a Form S-4 or S-8 or filed in connection
with an exchange offer or an offering of securities solely to the Company's
existing stockholders) on any form that would also permit the registration of
the Registrable Stock and such filing is to be on its behalf or on behalf of
selling holders of its securities for the general registration of Company Common
Stock to be sold for cash, the Company shall each such time promptly give the
Stockholder written notice of such determination setting forth the date on which
the Company proposes to file such registration statement, which date shall be no
earlier than 15 days from the date of such notice, and advising the Stockholder
of its right to have Registrable Stock included in such registration. Upon the
written request of any Holder received by the Company no later than 15 days
after the date of the Company's notice, the Company shall use all reasonable
efforts to cause to be registered under the Securities Act all of the
Registrable Stock that each such Holder has so requested to be registered.
(b) If, in the written opinion of the managing underwriter
(or, in the case of a non-underwritten offering, in the written opinion of the
Company), the total amount of such securities to be so registered, including
such Registrable Stock, will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to the then
current market value of such securities, or (ii) without otherwise materially
and adversely affecting the entire offering, then the Company shall be entitled
to reduce the number of shares of Registrable Stock to be sold in such offering
by the Holders and any other stockholder of the Company hereafter granted
incidental registration rights in proportion (as nearly as practicable) to the
amount of Registrable Stock requested to be included by each Holder and each
other stockholder at the time of filing the registration statement.
SECTION 5.05. SHELF REGISTRATION. (a) On or after the
expiration of the Initial Restriction Period, a Holder may use one of its
request registration rights granted pursuant to Section 5.03, subject to the
limitations of Section 5.03(d), to request that the Company file a "shelf"
registration statement pursuant to Rule 415 under the Securities Act (the "SHELF
REGISTRATION") with respect to the Registrable Stock. The Company shall (i) use
all reasonable efforts to have the Shelf Registration declared effective as soon
as reasonably practicable following such request and (ii) subject to Section
5.03(c)(ii), use all reasonable efforts to keep the Shelf Registration
continuously effective from the date such Shelf Registration is declared
effective until at least the second anniversary of such effective date in order
to permit the prospectus forming a part thereof to be usable by Holders during
such period.
<PAGE>
17
(b) Subject to Section 5.03(c)(ii), the Company shall
supplement or amend the Shelf Registration, (i) as required by the registration
form utilized by the Company or by the instructions applicable to such
registration form or by the Securities Act, (ii) to include in such Shelf
Registration any additional securities that become Registrable Stock by
operation of the definition thereof and (iii) following the written request of
an Initiating Holder pursuant to Section 5.05(c), to cover offers and sales of
all or a part of the Registrable Stock by means of an underwriting. The Company
shall furnish to the Holders of the Registrable Stock to which the Shelf
Registration relates copies of any such supplement or amendment sufficiently in
advance (but in no event less than five Business Days in advance) of its use or
filing with the Commission to allow the Holders a meaningful opportunity to
comment thereon.
(c) The Holders may, at their election and upon written
notice by an Initiating Holder to the Company, subject to the limitations set
forth in Section 5.03(c)(ii), effect offers and sales under the Shelf
Registration by means of one or more underwritten offerings, in which case the
provisions of Section 5.03(b) shall apply to any such underwritten distribution
of securities under the Shelf Registration and such underwriting shall, if sales
of Registrable Stock pursuant thereto shall have closed, be regarded as the
exercise of one of the registration rights contemplated by Section 5.03.
SECTION 5.06. OBLIGATIONS OF THE COMPANY. Whenever required
under Sections 5.03 and 5.05 to use all reasonable efforts to effect the
registration of any Registrable Stock, the Company shall, as expeditiously as
possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Stock (which shall be filed in no
event later than 90 days after written notice requesting a registration
statement under Sections 5.03 or 5.05 has been received by the Company, and use
all reasonable efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby determined as
provided hereafter; PROVIDED that the Company shall not be required to keep any
Registration Statement (other than the Shelf Registration) effective more than
120 days;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Stock covered
by such registration statement and as may be necessary to keep such Registration
Statement effective for a reasonable period not to exceed 120 days (or, in the
case of the Shelf Registration, as provided in Section 5.05(a)) and promptly
notify the Holders of any stop order issued or, to the Company's knowledge,
threatened to be issued by the Commission and take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered;
<PAGE>
18
(c) furnish to the Holders such numbers of copies of the
registration statement and the prospectus included therein (including each
preliminary prospectus and any amendments or supplements thereto in conformity
with the requirements of the Securities Act any exhibits filed therewith and
such other documents and information as they may reasonably request;
(d) use all reasonable efforts to register or qualify the
Registrable Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdiction within the United States and
Puerto Rico as shall be reasonably appropriate for the distribution of the
Registrable Stock covered by the registration statement; PROVIDED, HOWEVER, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business in or to file a general consent to service of
process in any jurisdiction wherein it would not but for the requirements of
this paragraph (d) be obligated to do so; and PROVIDED, FURTHER, that the
Company shall not be required to qualify such Registrable Stock in any
jurisdiction in which the securities regulatory authority requires that any
Holder submit any shares of its Registrable Stock to the terms, provisions and
restrictions of any escrow, lockup or similar agreement(s) for consent to sell
Registrable Stock in such jurisdiction unless such Holder agrees to do so;
(e) promptly notify each Holder for whom such Registrable
Stock is covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made, and at the request of any such Holder
promptly prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made. In the
event the Company shall give such notice, the Company shall extend the period
during which such Registration Statement shall be maintained effective as
provided in Section 5.06(a) (or, in the case of the Shelf Registration, Section
5.05(a)) by the number of days during the period from and including the date of
the giving of such notice to the date when the Company shall make available to
the Holders such supplemented or amended prospectus;
(f) furnish, at the request of any Holder requesting
registration of Registrable Stock pursuant to Sections 5.03 or 5.05, if the
method of distribution is by means of an underwriting, on the date that the
shares of Registrable Stock are delivered to the underwriters for sale pursuant
to such registration, or if such Registrable Stock is not being sold through
underwriters, on the date that the registration statement with respect to such
shares of Registrable
<PAGE>
19
Stock becomes effective, (1) a signed opinion, dated such date, of the
independent legal counsel representing the Company for the purpose of such
registration, addressed to the underwriters, if any, and if such Registrable
Stock is not being sold through underwriters, then to the Holders making such
request, as to such matters as such underwriters or the Holders holding a
majority of the Registrable Stock included in such registration, as the case may
be, may reasonably request and as would be customary in such a transaction; and
(2) letters dated such date and the date the offering is priced from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and if such Registrable Stock is not being sold through
underwriters, then to the Holders making such request and, if such accountants
refuse to deliver such letters to such Holders, then to the Company (i) stating
that they are independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements and other financial data of the Company included in the registration
statement or the prospectus, or any amendment or supplement thereto, comply as
to form in all material respects with the applicable accounting requirements of
the Securities Act and (ii) covering such other financial matters (including
information as to the period ending not more than five Business Days prior to
the date of such letters) with respect to the registration in respect of which
such letter is being given as such underwriters or the Holders holding a
majority of the Registrable Stock included in such registration, as the case may
be, may reasonably request and as would be customary in such a transaction;
(g) enter into customary agreements (including if the
method of distribution is by means of an underwriting, an underwriting agreement
in customary form) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registrable Stock to be
so included in the registration statement;
(h) otherwise use all reasonable efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, but not later than 18
months after the effective date of the registration statement, an earnings
statement covering the period of at least 12 months beginning with the first
full month after the effective date of such registration statement, which
earnings statements shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(i) use all reasonable efforts to list the Registrable
Stock covered by such registration statement with any securities exchange on
which the Company Common Stock is then listed.
For purposes of Sections 5.06(a) and 5.06(b), the period of distribution of
Registrable Stock in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Registrable Stock
in any other registration shall be deemed to extend until the earlier of the
sale of all Registrable Stock covered thereby and six months after the effective
date thereof.
<PAGE>
20
SECTION 5.07. FURNISH INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Agreement that the Holders shall furnish to the Company such information
regarding themselves, the Registrable Stock held by them, and the intended
method of disposition of such securities as the Company shall reasonably request
and as shall be required in connection with the action to be taken by the
Company.
SECTION 5.08. EXPENSES OF REGISTRATION. All expenses incurred
in connection with each registration pursuant to Sections 5.03, 5.04 and 5.05 of
this Agreement, excluding underwriters' discounts and commissions, but including
without limitation all registration, filing and qualification fees, word
processing, duplicating, printers' and accounting fees (including the expenses
of any special audits or "cold comfort" letters required by or incident to such
performance and compliance), fees of the National Association of Securities
Dealers, Inc. or listing fees, messenger and delivery expenses, all fees and
expenses of complying with state securities or blue sky laws, and the fees and
disbursements of counsel for the Company, shall be paid by the Company;
PROVIDED, HOWEVER, that if a registration request pursuant to Section 5.03 or
5.05 is subsequently withdrawn by the Holders the Company shall not be required
to pay any expenses of such registration proceeding, and such withdrawing
Holders shall bear such expenses. The Holders shall bear and pay the
underwriting commissions and discounts applicable to securities offered for
their account and the fees and disbursements of their counsel in connection with
any registrations, filings and qualifications made pursuant to this Agreement.
SECTION 5.09. UNDERWRITING REQUIREMENTS. In connection with
any underwritten offering, the Company shall not be required under Section 5.04
to include shares of Registrable Stock in such underwritten offering unless the
Holders of such shares of Registrable Stock accept the terms of the underwriting
of such offering that have been reasonably agreed upon between the Company and
the underwriters selected by the Holders.
SECTION 5.10. INDEMNIFICATION. In the event any Registrable
Stock is included in a registration statement under this Agreement:
(a) The Company shall indemnify and hold harmless each
Holder, such Holder's directors and officers, each person who participates in
the offering of such Registrable Stock, including underwriters (as defined in
the Securities Act), and each person, if any, who controls such Holder or
participating person within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which they may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or proceedings in respect thereof) arise out of
or are based on any untrue or alleged untrue statement of any material fact
contained in such registration statement on the effective date thereof
(including any prospectus filed under Rule 424 under the Securities Act or any
amendments or supplements thereto) or arise out of or are based upon the
omission or alleged omission to state
<PAGE>
21
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each such Holder, such
Holder's directors and officers, such participating person or controlling person
for any legal or other expenses reasonably incurred by them (but not in excess
of expenses incurred in respect of one counsel for all of them) in connection
with investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 5.10(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company; PROVIDED, FURTHER, that the Company shall not be liable
to any Holder, such Holder's directors and officers, participating person or
controlling person in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
connection with such registration statement, preliminary prospectus, final
prospectus or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, such Holder's directors and officers,
participating person or controlling person. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of any
such Holder, such Holder's directors and officers, participating person or
controlling person, and shall survive the transfer of such securities by such
Holder.
(b) Each Holder requesting or joining in a registration
severally and not jointly shall indemnify and hold harmless the Company, each of
its directors and officers, each person, if any, who controls the Company within
the meaning of the Securities Act, and each agent and any underwriter for the
Company (within the meaning of the Securities Act) against any losses, claims,
damages or liabilities, joint or several, to which the Company or any such
director, officer, controlling person, agent or underwriter may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or proceedings in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in such registration statement on the effective date thereof
(including any prospectus filed under Rule 424 under the Securities Act or any
amendments or supplements thereto) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, preliminary or final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written information
furnished by or on behalf of such Holder expressly for use in connection with
such registration; and each such Holder shall reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, agent or underwriter (but not in excess of expenses incurred
in respect of one counsel for all of them) in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the indemnity agreement contained in this
<PAGE>
22
Section 5.10(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of such Holder, and PROVIDED, FURTHER, that the liability of each Holder
hereunder shall be limited to the proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion that the net proceeds from
the sale of the shares sold by such Holder under such registration statement
bears to the total net proceeds from the sale of all securities sold thereunder,
but not in any event to exceed the net proceeds received by such Holder from the
sale of Registrable Stock covered by such registration statement.
(c) Promptly after receipt by an indemnified party under
this Section 5.10 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 5.10, notify the indemnifying party in
writing of the commencement thereof and the indemnifying party shall have the
right to participate in and assume the defense thereof with counsel selected by
the indemnifying party and reasonably satisfactory to the indemnified party
(unless (i) such indemnified party reasonably objects to such assumption on the
grounds that there may be defenses available to it which are different from or
in addition to those available to such indemnifying party, (ii) the indemnifying
party and such indemnified party shall have mutually agreed to the retention of
such counsel or (iii) in the reasonable opinion of such indemnified party
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding, in which case the indemnified party shall be
reimbursed by the indemnifying party for the reasonable expenses incurred in
connection with retaining separate legal counsel); PROVIDED, HOWEVER, that an
indemnified party shall have the right to retain its own counsel, with all fees
and expenses thereof to be paid by such indemnified party, and to be apprised of
all progress in any proceeding the defense of which has been assumed by the
indemnifying party. The failure to notify an indemnifying party promptly of the
commencement of any such action shall not relieve the indemnifying party from
any liability in respect of such action which it may have to such indemnified
party on account of the indemnity contained in this Section 5.10, unless (and
only to the extent) the indemnifying party was prejudiced by such failure, and
in no event shall such failure relieve the indemnifying party from any other
liability which it may have to such indemnified party. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any claim or pending or threatened proceeding in respect of which
the indemnified party is or could have been a party and indemnity could have
been sought hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all liability arising
out of such claim or proceeding.
(d) (i) To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party, in lieu
of indemnifying such
<PAGE>
23
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in
connection with the actions which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.10(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
SECTION 5.11. LOCKUP. Each Holder shall, in connection with
any registration of the Company's securities, upon the request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
agree in writing not to effect any sale, disposition or distribution of any
Registrable Stock (other than that included in the registration) without the
prior written consent of the Company or such underwriters, as the case may be,
for such period of time from 30 days prior to the effective date of such
registration as the Company or the underwriters may specify; PROVIDED, HOWEVER,
that (i) all executive officers and directors of the Company shall also have
agreed not to effect any sale, disposition or distribution of any Registrable
Stock under the circumstances and pursuant to the terms set forth in this
Section 5.11 and (ii) in no event shall the Holders be required to not effect
any sale, disposition or distribution for longer than 90 days after the
Registration Statement becomes effective.
<PAGE>
24
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. INTERPRETATION. (a) The headings contained in
this Agreement and, in the table of contents to this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(b) In the event of 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".
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 and Sections shall be construed to refer to Articles and Sections of
this Agreement.
SECTION 6.02. AMENDMENTS. No amendment, modification or waiver
in respect of this Agreement shall be effective unless it shall be in writing
and signed by both parties hereto.
SECTION 6.03. ASSIGNMENT. Except where otherwise expressly
provided herein, this Agreement and the rights and obligations hereunder shall
not be assignable or transferable by the parties hereto (except by operation of
law in connection with a merger, or sale of substantially all the assets, of the
parties hereto) without the prior written consent of the other party hereto. Any
attempted assignment in violation of this Section 6.03 shall be void.
SECTION 6.04. 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
<PAGE>
25
shall give or be construed to give to any Person, other than the parties hereto
and such assigns, any legal or equitable rights hereunder.
SECTION 6.05. 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 the Company,
Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, NJ 07608
Attention: Raymond C. Marier
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Clare O'Brien; and
(ii) if to the Stockholder,
SmithKline Beecham plc
One New Horizons Court
Middlesex, TW8 9EP
Brentford England
Attention: General Counsel
with copies to:
SmithKline Beecham Corporation
One Franklin Plaza
Philadelphia, PA 19102
Attention: U.S. General Counsel; and
<PAGE>
26
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Susan Webster
SECTION 6.06. ATTORNEY FEES. A party in breach of this
Agreement shall, on demand, indemnify and hold harmless the other party for and
against all reasonable out-of-pocket expenses, including legal fees, incurred by
such 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 6.07. 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 6.07; PROVIDED that receipt of copies of such
counterparts is confirmed.
SECTION 6.08. 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 6.09. CONSENT TO JURISDICTION. Each of the parties
hereto 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 or any transaction contemplated hereby.
Each of the Company and the Stockholder 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 the parties hereto 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 6.09. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby 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
<PAGE>
27
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 6.10. WAIVER OF JURY TRIAL. Each of the parties hereto
hereby waives to the fullest extent permitted by applicable law, any right it
may have to a trial by jury in respect to any litigation directly or indirectly
arising out of, under or in connection with this Agreement. Each of the parties
hereto (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, by, among other things, the mutual waivers and
certifications in this Section 6.10.
SECTION 6.11. SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 6.12. PRINCIPAL STOCKHOLDER INFORMATION. At any time
when the Holders, in the aggregate, own Stockholder Shares constituting (a) at
least 10% of the outstanding Company Common Stock in the case of (i) below or
(b) 5% of the outstanding Company Common Stock in the case of (ii) below, the
Stockholder shall use commercially reasonable efforts to, and to cause its
Affiliates to, promptly provide the Company with such information regarding the
Holders (i) as may be reasonably requested by the Company's customers
(including, without limitation, with respect to bids or proposals to prospective
customers) and (ii) as may be required by applicable law (including under
permits and licenses) with respect to principal stockholders of the Company;
PROVIDED that neither the Stockholder nor its Affiliates shall be required to
disclose any confidential information pursuant to this Section 6.12.
SECTION 6.13. 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.
<PAGE>
28
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
QUEST DIAGNOSTICS
INCORPORATED
By /s/ Kenneth W. Freeman
Name: Kenneth W. Freeman
Title: Chief Executive Officer
SMITHKLINE BEECHAM PLC
By /s/ Donald F. Parman
Name: Donald F. Parman
Title: Authorized Signatory
<PAGE>
Exhibit 7
CATEGORY ONE
LABORATORY DATA ACCESS AGREEMENT
This CATEGORY ONE LABORATORY DATA ACCESS AGREEMENT (this
"AGREEMENT"), dated as of August 16, 1999, between SmithKline Beecham plc, a
public limited liability company organized under the laws of England
("SMITHKLINE BEECHAM"), and Quest Diagnostics Incorporated, a Delaware
corporation ("QUEST DIAGNOSTICS").
WHEREAS, SmithKline Beecham and Quest Diagnostics have entered
into a Stock and Asset Purchase Agreement, dated as of February 9, 1999 (the
"PURCHASE AGREEMENT"), pursuant to which SmithKline Beecham has agreed to sell,
and Quest Diagnostics has agreed to purchase, SmithKline Beecham's clinical
laboratories business, including 100% of the outstanding capital stock of SBCL,
Inc., a Delaware corporation ("SBCL"), and certain other assets, as further
described therein (the "TRANSACTION");
WHEREAS, the clinical laboratory data previously collected by
SBCL becomes the property of Quest Diagnostics pursuant to the Purchase
Agreement; and
WHEREAS, as a condition to completion of the Transaction,
SmithKline Beecham has required Quest Diagnostics to grant to SmithKline
Beecham, and Quest Diagnostics is willing to so grant to SmithKline Beecham,
certain non-exclusive and limited-use license rights on economically preferred
terms for a limited term for the clinical laboratory data identified herein.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
set forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. (a) For purposes of this Agreement:
<PAGE>
"AFFILIATE" means with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by, or is under common control
with, a 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; PROVIDED that any Person
that performs Clinical Laboratory Services that generate revenues in any fiscal
year (as determined pursuant to generally accepted accounting principles in the
U.S.) exceeding $250,000,000 shall not be an Affiliate of SmithKline Beecham for
purposes of Articles III, IV and V. For purposes of the foregoing proviso,
Clinical Laboratory Services shall exclude Clinical Laboratory Information
Services (provided that the Person providing such Clinical Laboratory
Information Services does not perform and has not performed clinical laboratory,
anatomic pathology or other diagnostic testing services). SmithKline Beecham and
Quest Diagnostics shall not be deemed to be Affiliates of each other.
"APPLICABLE LAW" means, with respect to any jurisdiction, all
applicable statutes, laws, ordinances, rules, orders and regulations (to the
extent then in force and effect) of 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, having authority over an applicable Person in such jurisdiction.
"AUTHORIZED SUBCONTRACTOR" means, with respect to SmithKline
Beecham, any subcontractor of SmithKline Beecham or its Affiliates that agrees
in writing not to disclose to Third Parties Data received under this Agreement
except at the direction and on behalf of SmithKline Beecham.
"CATEGORY ONE A USES" means uses of Data within SmithKline
Beecham and its Affiliates that is not a Category One B Use.
"CATEGORY ONE B USES" means uses of Data by SmithKline Beecham
and its Affiliates in programs or services supplied to a Third Party (including
such programs and services under which SmithKline Beecham or its Affiliates
receive no direct reimbursement from such Third Party), if such program or
service is designed to support any disease state category or vaccine category
for which SmithKline Beecham or its Affiliates are developing, marketing,
co-marketing, distributing or selling a pharmaceutical or vaccines product;
PROVIDED that Category One B Use shall not mean merging, consolidating or
otherwise combining Data with any clinical laboratory data (other than such data
provided by Quest Diagnostics and its Affiliates), except on a Client by Client
basis.
"CATEGORY ONE USES" means Category One A Uses and/or Category
One B Uses.
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<PAGE>
"CATEGORY THREE DATA ACCESS AGREEMENT" means the Category
Three Data Access Agreement dated the date hereof between SmithKline Beecham and
Quest Diagnostics.
"CHANGE OF CONTROL" means any event where: (a) any "person" or
"group" (as such terms are used in Section 13(d) and 14(d) of the United States
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act) of shares representing more than 50% of the combined voting power of the
then outstanding securities entitled to vote generally in elections of directors
(the "VOTING STOCK") of SmithKline Beecham, unless the shareholders of
SmithKline Beecham immediately before such "person" or "group" becomes such a
beneficial owner of SmithKline Beecham continue to own, directly or indirectly
through such person or group, immediately following such event, at least a
majority of the combined voting power of the Voting Stock of SmithKline Beecham,
(b) SmithKline Beecham consolidates with or merges into any other corporation,
or conveys, transfers or leases all or substantially all of its assets (other
than to a wholly owned subsidiary of SmithKline Beecham) or any other
corporation merges into SmithKline Beecham, and, in the case of any such
transaction, the outstanding capital stock of SmithKline Beecham is reclassified
into or exchanged for any other property or security, unless the shareholders of
SmithKline Beecham immediately before such transaction own, directly or
indirectly, immediately following such transaction, at least a majority of the
combined voting power of the Voting Stock of the corporation resulting from, or
to which its assets were conveyed, transferred or leased in connection with,
such transaction or (c) at any time the Continuing Directors do not constitute a
majority of the Board of Directors of SmithKline Beecham (or, if applicable, a
successor corporation to SmithKline Beecham).
"CLIENT" means (a) with respect to Quest Diagnostics and any
of its Affiliates, any Person for whom Quest Diagnostics or any of its
Affiliates is providing laboratory services that generates Laboratory Data and
(b) with respect to SmithKline Beecham and any of its Affiliates, any Person for
whom SmithKline Beecham or any of its Affiliates is providing Data pursuant to
this Agreement.
"CLINICAL LABORATORY INFORMATION SERVICES" means providing in
any manner, directly or indirectly, data or information products or services
which substantially consist of laboratory test results and/or related
information (other than initial reporting of laboratory test results and test
development and other similar research activities engaged in by Quest
Diagnostics or its Affiliates).
"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) including
the reports of test results, or
3
<PAGE>
providing to any unaffiliated Person, in any manner, directly or indirectly,
data or information products or services which substantially consist of
laboratory test results and/or related information.
"CONTINUING DIRECTORS" means as of any date of determination,
any member of the Board of Directors of SmithKline Beecham who (i) was a member
of such Board of Directors on the date of this Agreement or (ii) was nominated
for election or elected to such Board of Directors with the approval of a
majority of the Continuing Directors who were members of such board at the time
of such nomination or election.
"DATA" means Laboratory Data and Encoded Laboratory Data.
"EFFECTIVE DATE" means the date upon which this Agreement is
effective and shall be the Closing Date as defined in the Purchase Agreement.
"ENCODED LABORATORY DATA" means Laboratory Data that has been
encoded through the Encoding Process. Encoded Laboratory Data shall specifically
exclude Patient Identifiers.
"ENCODING KEY" means the unique randomly generated code
assigned by the Information Encoder in the Encoding Process which relates to a
specific person. An Encoding Key shall specifically exclude Encounter Numbers
(as defined in Appendix F).
"ENCODING PROCESS" means the process and procedures described
in Article VI.
"HEALTH INFORMATION" means that portion of Laboratory Data
that is medical and clinical information associated with any individual person
that relates to the past, present or future (a) physical or mental health
condition of the person, (b) family history of the person, (c) provision of
healthcare to the individual and (d) date of service. Health Information shall
specifically exclude Patient Identifiers and shall specifically include
Encounter Numbers.
"HISTORICAL DATA" means Laboratory Data entered into a
database prior to the Effective Date.
"INFORMATION ENCODER" means that independent Third Party
retained by SmithKline Beecham to perform the duties of the Encoding Process as
described in Article VI.
"INITIAL TERM" means, unless and until earlier terminated
pursuant to this Agreement, the forty-two (42) month period following the
Effective Date.
"IX COMPANY" has the meaning assigned to such term in the
Category Three Data Access Agreement.
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<PAGE>
"LABORATORY DATA" means and consists of clinical laboratory
data and associated person specific data and other information related to
Clinical Laboratory Services performed by SBCL, Quest Diagnostics or their
Affiliates, but expressly excluding Data that (a) is generated by clinical
trials and forensic toxicology or (b) relates to Clinical Laboratory Services
performed prior to January 1, 1998 by Quest Diagnostics and its Affiliates
(excluding SBCL and its subsidiaries) or prior to January 1, 1997, by SBCL and
its subsidiaries.
"PATIENT DEMOGRAPHIC INFORMATION" means (a) with respect to
any Person, the following person-associated information: date of birth, age,
gender and 5-digit zip code, and (b) with respect to any Person's test order,
laboratory requisition number and identity of the performing laboratory.
"PATIENT IDENTIFIERS" means with respect to any Person, name,
street address, 9-digit zip code, communication numbers (telephone, facsimile,
pager, e-mail), Social Security number and patient benefit member identification
numbers.
"PAYOR/PROVIDER INFORMATION" means and includes that portion
of Laboratory Data consisting of information identifying healthcare payors and
providers (e.g., the referring physician, hospital or other primary provider).
"PERSON" means any individual, firm, corporation, partnership,
limited partnership, limited liability company, trust, joint venture, government
entity or other entity.
"PHARMACEUTICAL BUSINESS" means the discovery, development,
manufacture, marketing or distribution of pharmaceutical or vaccine products.
"PHARMACEUTICAL COMPANY" means a Person that derives, directly
or indirectly, more than $250,000,000 in revenues in any fiscal year from one or
more Pharmaceutical Businesses.
"QUEST DIAGNOSTICS INFORMATICS BUSINESS" means any business or
businesses conducted by Quest Diagnostics or its Affiliates pursuant to which
Quest Diagnostics or any of its Affiliates provides Clinical Laboratory
Information Services using laboratory data from testing services performed by
Quest Diagnostics and its Affiliates.
"QUEST INFORMATICS DATABASE" means the compilation of
Laboratory Data in the centralized clinical laboratory database maintained by
Quest Diagnostics or its Affiliates on the Effective Date and any comparable or
successor database or databases maintained by Quest Diagnostics or its
Affiliates in connection with the conduct of Clinical Laboratory Information
Services by Quest Diagnostics or its Affiliates.
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<PAGE>
"SBCL INFORMATICS DATABASE" means the compilation of
Laboratory Data in the centralized clinical laboratory database maintained by
SBCL or its subsidiaries on the Effective Date and any comparable or successor
database or databases maintained by Quest Diagnostics or its Affiliates in
connection with the conduct of Clinical Laboratory Information Services by Quest
Diagnostics or its Affiliates.
"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 ss.59A of
the Internal Revenue Code), 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.
"TERM" means, unless and until earlier terminated pursuant to
this Agreement, the Initial Term and any applicable Renewal Term in accordance
with Article IX.
"THIRD PARTY" means any party other than SmithKline Beecham
and Quest Diagnostics and their respective Affiliates.
"YEAR 2000 COMPLIANCE" includes any requirement that the
design and performance specifications of the relevant items include: accurate
date and century recognition, calculations that accommodate same century and
multicentury formulas and date values, and date/data interface values that
accurately reflect the century.
(b) The following terms have the meanings set forth in the
Sections set forth below:
Term Section
- ---- -------
Additional Services............................................ 7.05(b)
Agreement...................................................... Preamble
Applicable Fee................................................. 8.01(b)
Applicable Period.............................................. 8.01(b)
Authorization.................................................. 4.02(a)
Commencement Date.............................................. 8.01(a)
Data File 1.................................................... Appendix F
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<PAGE>
Term Section
- ---- -------
Data File 2.................................................... Appendix F
Deliverables................................................... 6.06
Disputes....................................................... 12.15(a)
Encoder Contract............................................... 6.01(b)
Encounter Number............................................... Appendix F
Exchange Act................................................... 1.01(a)
Indemnified Party.............................................. 11.03(a)
Loss........................................................... 11.01
Master Encoding Key Database................................... 6.03(b)
Other Quest Data Access Agreement.............................. 8.01(e)
Protocols...................................................... 6.02(c)
Purchase Agreement............................................. Preamble
Quest Diagnostics.............................................. Preamble
Quest Diagnostics Indemnified Party............................ 11.01
Renewal Term................................................... 9.02
SBCL........................................................... Preamble
SmithKline Beecham............................................. Preamble
SmithKline Beecham Indemnified Party........................... 11.02
Source Identifier.............................................. Appendix F
Third Party Claims............................................. 11.03(b)
Transaction.................................................... Preamble
Voting Stock................................................... 1.01(a)
ARTICLE II
RIGHTS IN DATA
SECTION 2.01. RIGHTS IN DATA. The Laboratory Data to be
disclosed to SmithKline Beecham for use by SmithKline Beecham is proprietary
information of Quest Diagnostics. SmithKline Beecham's rights in the Data are
defined solely by the Category One Uses and the other terms, conditions and
limitations in this Agreement.
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<PAGE>
ARTICLE III
ENCODED LABORATORY DATA
SECTION 3.01. CATEGORY ONE USES. Quest Diagnostics hereby
grants to SmithKline Beecham and its Affiliates a non-exclusive, perpetual,
worldwide right and license (with sublicensing rights and transfer rights as
provided herein) to use Encoded Laboratory Data received under Section 3.02 for
Category One Uses, including the rights to receive, copy, transfer, manipulate,
integrate, disclose and display, subject to the terms and conditions of this
Agreement. SmithKline Beecham, without Authorization, shall have no right to
directly or indirectly attempt to match or link Encoded Laboratory Data with
Patient Identifiers and shall refrain from doing so.
SECTION 3.02. DELIVERY OF ENCODED LABORATORY DATA. During the
Term, if SmithKline Beecham requests Encoded Laboratory Data from Quest
Diagnostics, Quest Diagnostics shall, at the fees set forth in Article VIII,
electronically deliver, or deliver in electronic format, to a location in the
United States, Encoded Laboratory Data to SmithKline Beecham. Each transmission
of Encoded Laboratory Data shall be made in accordance with the performance
criteria set forth in Articles VI and VII, to the extent applicable, to one
recipient (which shall be SmithKline Beecham or an Affiliate or Authorized
Subcontractor designated by SmithKline Beecham).
ARTICLE IV
LABORATORY DATA
SECTION 4.01. CATEGORY ONE USES. Quest Diagnostics hereby
grants to SmithKline Beecham and its Affiliates a non-exclusive, perpetual,
worldwide right and license (with sublicensing rights and transfer rights as
provided herein) to use Laboratory Data received under Section 4.02 for Category
One Uses, including the rights to receive, copy, transfer, manipulate,
integrate, disclose and display, subject to Authorization (as defined below) and
the other terms and conditions of this Agreement.
SECTION 4.02. REQUEST FOR LABORATORY DATA. (a) During the
Term, in the event that SmithKline Beecham requests Laboratory Data from Quest
Diagnostics and accompanies such request by a written or electronic
authorization (an "AUTHORIZATION") granted by a Person with authority to grant
SmithKline Beecham access to Laboratory Data (as further provided herein), Quest
Diagnostics shall provide, at the fees set forth in Article VIII, SmithKline
Beecham or its Affiliates (as applicable) with such Laboratory Data in
accordance with the
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Authorization and the terms and conditions of this Agreement. Upon request by
Quest Diagnostics, SmithKline Beecham shall, and, if applicable, shall cause its
Affiliates to, disclose to Quest Diagnostics the identity of any Third Party to
which Laboratory Data (other than Encoded Laboratory Data) provided to
SmithKline Beecham under this Agreement is being directly disclosed by
SmithKline Beecham or its Affiliates.
(b) Depending upon the terms of such Authorization, Quest
Diagnostics shall electronically deliver, or deliver in electronic format, to a
location in the United States, (i) the requested Laboratory Data or (ii) at
SmithKline Beecham's election in its sole discretion, the Encounter Numbers for
the Data covered by the Authorization, either to SmithKline Beecham or an
Affiliate or Authorized Subcontractor as designated in the Authorization. Any
such delivery shall be made in accordance with the performance criteria set
forth in Article VII to one recipient designated by SmithKline Beecham.
SECTION 4.03. AUTHORIZATION. Authorizations shall be
substantially in the form attached hereto as Appendix B, provided that
SmithKline Beecham may make reasonably appropriate drafting changes to tailor an
Authorization to a particular Client or circumstance. Quest Diagnostics may
revise Appendix B from time to time to reflect changes in its operating
procedures or in any Applicable Laws, subject to SmithKline Beecham's approval
not to be unreasonably withheld or delayed. Any dispute between the parties
regarding Appendix B shall be resolved pursuant to Section 12.15. Receipt of an
Authorization executed by (1) a patient or a Person representing himself or
herself to be the legal representative of such patient or (2) a health plan
representing itself to have authority over such patient's Laboratory Data shall
be sufficient for any purpose under this Agreement for which an Authorization is
required with respect to such patient's Laboratory Data. SmithKline Beecham
shall be responsible for obtaining, at its sole expense, valid Authorizations
for Category One Uses of Laboratory Data under this Agreement.
ARTICLE V
DISCLOSURE OF DATA
SECTION 5.01. CATEGORY ONE A USES. Notwithstanding Section
5.02, SmithKline Beecham and its Affiliates may disclose (but not sublicense)
Data to a Person that is not an Affiliate of SmithKline Beecham if the
disclosure is (a) to a governmental, regulatory or accrediting agency, (b) is
required by Applicable Law or (c) is for a bona fide business purpose in the
pursuit of the ordinary course of the Pharmaceutical Business of SmithKline
Beecham or one of its Affiliates; PROVIDED that SmithKline Beecham and its
Affiliates may not disclose Data pursuant to this Section 5.01 in exchange for
payment to it of a fee or other specified consideration (other than fees or
other consideration paid to it by its Affiliates).
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SECTION 5.02. CATEGORY ONE B USES. SmithKline Beecham and its
Affiliates may not disclose or sublicense Data under Category One B Uses to a
Person that is not an Affiliate of SmithKline Beecham except to the extent that
the disclosure (a) is to a governmental, regulatory or industry accrediting
agency, (b) is required by Applicable Law or (c) is pursuant to a written
sublicense agreement between SmithKline Beecham (or its Affiliate) and the
sublicensee pursuant to which the sublicensee agrees to the following
restrictions:
(i) The sublicensee shall keep confidential and not further
disclose the applicable Data except for a bona fide business purpose in
the pursuit of such sublicensee's ordinary course operations; PROVIDED
that such sublicensee may not further sublicense or disclose Data in
exchange for payment to it of a fee or other specified consideration
(other than fees or other consideration paid to it by its Affiliates).
A fee charged by a sublicensee for a package of health related goods
and/or services that includes access to and disclosure of Data as part
of such goods and/or services shall be deemed to not be the sublicense
or disclosure of Data in exchange for a fee or other specified
consideration. For purposes of this Section 5.02, the "ordinary course
operations" of a sublicensee shall mean (a) the processes used by the
sublicensee or its Affiliates to facilitate the health of its or its
Affiliates' members or patients or to evaluate the efficiency,
effectiveness, cost or profitability of such processes, (b) the
utilization of the services and programs provided to such sublicensee
or its Affiliates, directly or indirectly, by SmithKline Beecham or
SmithKline Beecham's Affiliates as permitted under this Agreement and
(c) disclosure of Data to a governmental, regulatory or accrediting
agency or if required by Applicable Law.
(ii) To the extent that any Encoded Laboratory Data relates to
Persons that are not members, customers or patients of the sublicensee
or its Affiliates, the sublicensee shall not disclose such Data (other
than to its Affiliates and to its agents, consultants and
subcontractors in the ordinary course operations of such sublicensee
who shall be restricted from the further disclosure of such Data to the
same degree as such sublicensee is restricted by this Section 5.02(c))
in a manner reasonably likely to identify the health care payor (e.g.
the managed care organization) with respect to such Data.
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SECTION 5.03. CATEGORY ONE USES. Notwithstanding the
provisions of Sections 5.01 and 5.02:
(a) SmithKline Beecham shall not, and shall cause its
Affiliates not to, (i) disclose Data, that is received pursuant to this
Agreement, via a website on the Internet that can be directly used by a patient
to access his or her laboratory test results or (ii) provide software to any
Third Party to facilitate such disclosure via a website on the Internet, except
in the case of both of the foregoing clauses (i) and (ii) where IX Company (as
defined in the Participation Agreement dated as of the date hereof, between
SmithKline Beecham and Quest Diagnostics) does so solely with respect to the
members and/or patients of a Client of SmithKline Beecham or its Affiliates or
of the Affiliates of such Client. For the avoidance of doubt, Quest Diagnostics
acknowledges that Clients of SmithKline Beecham and its Affiliates are not
restricted by this Agreement from disclosing Data via the Internet provided that
such disclosure complies with the other provisions of this Article V.
(b) Notwithstanding any provision to the contrary, SmithKline
Beecham shall delete all Payor/Provider Information from any Data provided to a
Person that is not its Affiliate or Authorized Subcontractor except to the
extent (and only to the extent) that Data is provided to (i) the applicable
payor or provider or patient with respect to the Clinical Laboratory Services
covered by such Data, (ii) a governmental, regulatory or accrediting agency or
(iii) a Person entitled to receive such information as a matter of Applicable
Law.
(c) Any disclosure by SmithKline Beecham or its Affiliates of
Laboratory Data (that is not Encoded Laboratory Data) shall be consistent with
the terms of the applicable Authorization. Any disclosure by SmithKline Beecham
and its Affiliates of Data shall be in compliance with Applicable Law and the
terms of this Agreement.
SECTION 5.04. MOST FAVORED NATION TREATMENT REGARDING
DISCLOSURE RESTRICTIONS. Notwithstanding the provisions of Section 5.01, 5.02 or
5.03, in the event that Quest Diagnostics or its Affiliates shall provide any
Data to any Pharmaceutical Company with confidentiality and/or disclosure
restrictions (including without limitation confidentiality and/or disclosure
restrictions on sublicensees of such Pharmaceutical Company) less stringent than
those contemplated by Section 5.01, 5.02 or 5.03, then Quest Diagnostics shall
promptly notify SmithKline Beecham of such less stringent restrictions, in which
case SmithKline Beecham shall have the right to disclose that same type of Data
to Third Parties subject to such less stringent restrictions rather than the
applicable restrictions provided in Section 5.01, 5.02 or 5.03. For purposes of
this Section 5.04, Data shall be deemed provided to a Pharmaceutical Company if
(a) the contract or agreement pursuant to which Quest Diagnostics or its
Affiliates provide such Data recites that a Pharmaceutical Company is sponsoring
or paying for the provision of the applicable program or service that includes
such Data, (b) a Pharmaceutical Company is a party to the contract or agreement
pursuant to which Quest Diagnostics or its Affiliates provide such
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Data or (c) such Data otherwise is provided for a purpose or project that Quest
Diagnostics knows (or reasonably should know) is sponsored or paid for by a
Pharmaceutical Company. For purposes of this Section 5.04, "knows" refers to the
knowledge (or imputed knowledge) of (a) the business leader of the Quest
Diagnostics Informatics Business and employees who report directly to such
business leader, (b) the business leader of the Quest Diagnostics managed care
business and employees who report directly to such business leader and (c) any
attorney employed in the legal department of Quest Diagnostics who routinely
reviews contracts entered into by Quest Diagnostics or its Affiliates with
managed care organizations or Pharmaceutical Companies.
ARTICLE VI
ENCODING
SECTION 6.01. SELECTION OF THE INFORMATION ENCODER. (a)
SmithKline Beecham shall be responsible for the selection of the Information
Encoder, subject to Quest Diagnostics' approval, which approval shall not be
unreasonably withheld or delayed. Quest Diagnostics shall be entitled to meet
with any prospective Information Encoder solely to review its procedures for
maintaining the confidentiality and security of Laboratory Data to be received
by the Information Encoder prior to giving its approval; PROVIDED, HOWEVER, that
the ultimate discretion in such selection belongs to SmithKline Beecham.
(b) SmithKline Beecham shall be responsible for the
negotiation with and implementation of an agreement with the Information
Encoder. SmithKline Beecham shall ensure that the agreement between SmithKline
Beecham and the Information Encoder (the "ENCODER CONTRACT") shall meet the
requirements set forth in Section 6.07.
(c) SmithKline Beecham shall be responsible for all fees and
expenses of the Information Encoder.
SECTION 6.02. PROCEDURES AND PROTOCOLS. (a) The procedures and
protocols to be used by the Information Encoder are intended to facilitate
linkage by SmithKline Beecham of the Encoded Laboratory Data for a given
individual person as received from Quest Diagnostics or its Affiliates with
other anonymous or encoded medical or clinical healthcare information associated
with the same individual person, to which information SmithKline Beecham or its
Affiliates may otherwise have access. Such procedures and protocols shall be
compatible with Quest Diagnostics' data formats as of the Effective Date and
fields as specified in Appendix A.
(b) Quest Diagnostics shall provide to the Information Encoder
and SmithKline Beecham copies of documentation relating to the data
specifications, elements and
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fields and formats used by Quest Diagnostics and its Affiliates with respect to
Data. Quest Diagnostics shall provide the Information Encoder and SmithKline
Beecham with access to use any standard data dictionary that Quest Diagnostics
or any Affiliate of Quest Diagnostics maintains or uses with respect to the
Laboratory Data and its documentation on file layouts in connection with the
Laboratory Data. Quest Diagnostics will identify, maintain and make available a
single point of contact to assist SmithKline Beecham in resolving any questions
regarding Data.
(c) The linking of individual data files, creation of the
Encoding Keys and the creation of the Master Encoding Key Database (as defined
below) shall be performed by the Information Encoder in accordance with the
processes and protocols provided to the Information Encoder by SmithKline
Beecham or its Affiliates from time to time (the "PROTOCOLS"). Notwithstanding
any other terms in this Agreement, in no event shall the Protocols be shared
with Quest Diagnostics or its Affiliates. In no event shall SmithKline Beecham,
Quest Diagnostics or any of their respective Affiliates provide, without
Authorization, any Laboratory Data other than Patient Identifiers, Patient
Demographic Information, Encoding Keys, Encounter Numbers, Source Identifiers
(as defined in Appendix F) and physician identification numbers to the
Information Encoder.
SECTION 6.03. USE OF INFORMATION. (a) The Information Encoder
shall be authorized to use the Patient Identifiers, Patient Demographic
Information, Encoding Keys, Encounter Numbers, Source Identifiers and physician
identification numbers solely for the purposes set forth in this Article VI.
(b) The Information Encoder shall be authorized to create and
maintain a database of the Patient Identifiers, Patient Demographic Information,
Encoding Keys, Encounter Numbers, Source Identifiers and physician
identification numbers provided by Quest Diagnostics ("MASTER ENCODING KEY
DATABASE") and shall be authorized to create a permanent encoding conversion
table for the individual files which links multiple individual fields for the
Patient Identifiers, Patient Demographic Information, Encoding Keys, Encounter
Numbers, Source Identifiers and physician identification numbers concerning an
individual, while maintaining individual accessibility of each data file
provided. The Information Encoder is authorized to use such Master Encoding Key
Database (subject to the terms of this Agreement, particularly regarding patient
confidentiality and Authorization) to link Encoding Keys to such individual data
files regarding the same individual and to link other demographic data to the
Encoding Key. The Information Encoder may make copies of the Master Encoding Key
Database or portions thereof, PROVIDED that the Master Encoding Key Database and
such copies are maintained by the Information Encoder under its control in
secure settings at all times.
SECTION 6.04. HISTORICAL DATA ENCODING. Quest Diagnostics (a)
will provide to the Information Encoder Patient Identifiers, Patient Demographic
Information, physician
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identification numbers, Encounter Numbers and Source Identifiers from the
Historical Data and (b) will provide to SmithKline Beecham, or an Affiliate or
Authorized Subcontractor of SmithKline Beecham, Laboratory Data from the
Historical Data, with the corresponding Patient Identifiers deleted, in each
case in accordance with Appendix F.
SECTION 6.05. ONGOING DATA ENCODING. Using the same
methodology and programming developed for the encoding of Historical Data
pursuant to the Encoding Process described on Appendix F (but using the service
levels provided in this Section 6.05), Quest Diagnostics no less frequently than
daily (for this purpose, six days a week or seven days a week if the normal
course of business) (with respect to the SBCL Informatics Database, weekly until
updated more frequently as provided in Section 7.01(d), at which point at least
as frequently as the SBCL Informatics Database is updated) shall send (a) to the
Information Encoder a Data File 1 and (b) to SmithKline Beecham or an Affiliate
or Authorized Subcontractor of SmithKline Beecham a Data File 2, in each case
generated by Quest Diagnostics and its Affiliates from the Quest Informatics
Database and the SBCL Informatics Database, commencing with the most recent
submission under this Section 6.05 (or in the case of the first submission under
this Section 6.05, commencing with all Laboratory Data since the most recent
Laboratory Data included in the Historical Data). The Information Encoder will
deliver to SmithKline Beecham the Encoding Keys created using the Encoding
Process together with the corresponding Encounter Numbers in Data File 1.
SECTION 6.06. COSTS AND EXPENSES. SmithKline Beecham shall
reimburse Quest Diagnostics for all reasonable costs and expenses to the extent
associated with the setup of the processes to transfer and process to the
Information Encoder and SmithKline Beecham (including initial extraction of, but
not for ongoing extraction of) Patient Identifiers, Patient Demographic
Information, Encounter Numbers, Source Identifiers, physician identification
numbers and Laboratory Data in accordance with this Article VI (the
"DELIVERABLES"), including but not limited to costs of acquiring and installing
required hardware and disk space, programming costs, interface development
costs, line charges, and any other such costs and expenses; PROVIDED that
SmithKline Beecham shall not be obligated to reimburse Quest Diagnostics more
than $90,000 pursuant to this Section 6.06. Quest Diagnostics shall be
responsible for all costs and expenses relating to the Deliverables in excess of
$90,000 and all costs and expenses associated with the ongoing processes to
transfer and process to the Information Encoder and SmithKline Beecham
(including ongoing extraction of) the Laboratory Data.
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SECTION 6.07. INFORMATION ENCODER CONTRACT. The Encoder
Contract shall meet the following requirements:
(a) The Encoder Contract shall incorporate the duties of the
Information Encoder as set forth in this Article VI, and the relevant
definitions from Article I, including the definitions for Encoded Laboratory
Data, Patient Identifiers, Encoding Keys, Encounter Numbers, Source Identifiers
and Patient Demographic Information.
(b) The Information Encoder shall be subject to the terms of
Section 12.03 regarding confidentiality.
(c) The Information Encoder shall be prohibited from assigning
the Encoder Contract without Quest Diagnostics' consent, which shall not be
unreasonably withheld or delayed.
(d) If the Information Encoder's performance under the Encoder
Contract materially breaches the provisions of this Article VI and such breach
is not cured within 30 days of SmithKline Beecham's receipt of written notice of
such breach from Quest Diagnostics or, if such breach is not of a type that can
reasonably be cured within such period, within 90 days of SmithKline Beecham's
receipt of written notice of such breach from Quest Diagnostics (notwithstanding
that the Information Encoder is working diligently to cure such breach), then
Quest Diagnostics may suspend the delivery of Patient Identifiers, Patient
Demographic Information, Encounter Numbers, Source Identifiers and physician
identification numbers to the Information Encoder pursuant to this Article VI.
Any such suspension shall be pursuant and subject to the provisions of Section
9.05. SmithKline Beecham shall notify Quest Diagnostics promptly if it becomes
aware that the Information Encoder's performance under the Encoding Contract
materially breaches the provisions of this Article VI.
(e) The Encoder Contract shall provide that, in consideration
of Quest Diagnostics' provision of Patient Identifiers, Patient Demographic
Information, Encounter Numbers and physician identification numbers to the
Information Encoder, Quest Diagnostics shall have the right to exercise audit
rights with respect to the Information Encoder during normal business hours,
without unreasonably interfering with the Information Encoder's business and at
Quest Diagnostics' expense (and that SmithKline Beecham shall be empowered to
and shall enforce said rights of Quest Diagnostics). Such audit rights shall be
limited solely to the right to review the Encoder Contract and to verify the
Information Encoder's compliance with the applicable terms of this Article VI
and Section 12.03.
(f) Upon the termination of the Encoder Contract, the
Information Encoder either shall transfer all its files relating to the Master
Encoding Key Database to a successor Information Encoder that has entered into
an Encoder Contract with SmithKline Beecham that
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meets the requirements of this Section 6.07 or, in the event that no Information
Encoder is appointed, either destroy all its files relating to the Master
Encoding Key Database (and certify to Quest Diagnostics that they have been
destroyed) or deliver such files to Quest Diagnostics. Notwithstanding the
foregoing, the Information Encoder and SmithKline Beecham shall be permitted to
retain a copy of any portion of the Patient Identifiers and Patient Demographic
information that is generally available from third party sources without
violation of Applicable Law; PROVIDED such information is maintained in a format
that is not linked with the Master Encoding Key Database or any Encoding Keys or
otherwise could reasonably be expected to link Patient Identifiers with the
applicable patients' Health Information. Such information only may be retained
and used for the benefit of SmithKline Beecham and its Affiliates.
(g) Except as permitted by Section 6.07(f) or this Section
6.07(g), under no circumstances will the Information Encoder provide to
SmithKline Beecham or its Affiliates or any Person other than Quest Diagnostics
the Master Encoding Key Database or Encoding Keys in any format that could
reasonably be expected to permit such Person to link Patient Identifiers with
the applicable patient's Health Information. Notwithstanding the foregoing, in
the event that SmithKline Beecham or its Affiliates have delivered to the
Information Encoder an Authorization, then the Information Encoder may provide
to SmithKline Beecham or its Affiliates the Encoding Keys, together with the
Patient Identifiers and Patient Demographic Information, covered by the
Authorization. In such event, SmithKline Beecham shall deliver to Quest
Diagnostics, by electronic or other means, a copy of the applicable
Authorization not later than two business days after the date on which
SmithKline Beecham delivers such Authorization to the Information Encoder and
notice that SmithKline Beecham has requested the Information Encoder to deliver
such Encoding Keys, Patient Identifiers and Patient Demographic Information to
SmithKline Beecham or its Affiliates.
ARTICLE VII
QUALITY OF DATA AND SERVICE LEVELS
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SECTION 7.01. QUALITY OF DATA. (a) Except as expressly set
forth in this Agreement, Quest Diagnostics makes no representation or warranty
with respect to the quality of any Data provided to SmithKline Beecham pursuant
to this Agreement and shall provide such Data on an "as is" basis including,
without limitation, (i) any representation or warranty regarding Year 2000
Compliance or (ii) any warranty of merchantability or fitness of use; PROVIDED,
HOWEVER, that Quest Diagnostics will use reasonable commercial efforts to
maximize the accuracy of Data and to cause Laboratory Data relating to Clinical
Laboratory Services performed by Quest Diagnostics or its Affiliates after the
Effective Date to be in Year 2000 Compliance. Any efforts made by Quest
Diagnostics or its Affiliates in the normal course of the Quest Diagnostics
Informatics Business to improve the accuracy of the Data also shall be made for
SmithKline Beecham and its Affiliates pursuant to this Agreement.
(b) Quest Diagnostics makes no commitment to continue in the
Quest Diagnostics Informatics Business. If Quest Diagnostics and its Affiliates
exit the Quest Diagnostics Informatics Business and no longer maintain the Quest
Informatics Database and/or the SBCL Informatics Database, then Quest
Diagnostics shall provide the Laboratory Data on a "where is" as well as "as is"
basis with SmithKline Beecham to pay for all reasonable costs associated with
extracting Data from the laboratory information and billing information systems
of Quest Diagnostics and its Affiliates and transmitting such Data to SmithKline
Beecham; PROVIDED that Quest Diagnostics shall only be obligated to provide
SmithKline Beecham with Data relating to the data fields set forth on Appendix A
as of the date hereof plus Data relating to any data fields added to Appendix A
after the date hereof, but, subject to Section 7.04, only to the extent that
Quest Diagnostics and its Affiliates collect such Laboratory Data in the course
of performing Clinical Laboratory Services. In furtherance of this Section
7.01(b) and Section 7.01(e), Quest Diagnostics agrees to use commercially
reasonable efforts to accommodate, at SmithKline Beecham's expense, reasonable
requests for any cleaning, collecting and/or transmitting of Laboratory Data,
including to facilitate encoding pursuant to Article VI.
(c) Unless (i) Quest Diagnostics or its Affiliates no longer
maintain the Quest Informatics Database and/or the SBCL Informatics Database or
(ii) Quest Diagnostics is in breach of its obligations set forth in Section
7.01(d) or (e) or Section 7.02(a), Quest Diagnostics' obligation to use
Laboratory Data to create Encoded Laboratory Data pursuant to Article VI for
delivery to SmithKline Beecham pursuant to Section 3.02 and its obligation to
deliver Laboratory Data to SmithKline Beecham pursuant to Section 4.02 shall be
limited to the Laboratory Data residing in electronic format in the Quest
Informatics Database and/or the SBCL Informatics Database, except to the extent
provided in Section 7.01(e).
(d) So long as Quest Diagnostics or its Affiliates conduct the
Quest Diagnostics Informatics Business, Quest Diagnostics shall cause the Quest
Informatics Database and the SBCL Informatics Database:
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(i) to be updated, (A) in the case of the Quest Informatics
Database on a daily basis (at least five days a week) and (B) in the
case of the SBCL Informatics Database no less frequently than on a
weekly basis, with all Laboratory Data then reasonably available
relating to at least the fields then set forth on Appendix A (but in no
event relating to less than the fields set forth on Appendix A) and
generated by Quest Diagnostics or its Affiliates since the previous
time as of which such database or databases have been so updated, and
(ii) to include in a timely fashion Laboratory Data with
respect to substantially all Clinical Laboratory Services (excluding
Clinical Laboratory Information Services) performed by Quest
Diagnostics and its Affiliates during the preceding three-year period
(but in any event after January 1, 1998).
Without limiting Section 7.01(d)(i), Quest Diagnostics shall use reasonable
commercial efforts to cause the SBCL Informatics Database to be updated pursuant
to the foregoing clause (i) on a daily basis (at least five days a week). Quest
Diagnostics shall use commercially reasonable efforts to cause the Quest
Informatics Database and the SBCL Informatics Database to include, not later
than five days after the applicable laboratory test result is finally reported
to the applicable physician, Laboratory Data with respect to substantially all
Clinical Laboratory Services (excluding Clinical Laboratory Information
Services) performed by Quest Diagnostics and its Affiliates after the date
hereof, PROVIDED that, as of any date, Quest Diagnostics shall not be required
to cause such databases to include Laboratory Data with respect to Clinical
Laboratory Services performed more than three years prior to such date. Quest
Diagnostics shall use commercially reasonable efforts to cause each laboratory
that transmits Laboratory Data for entry into the Quest Informatics Database
and/or the SBCL Informatics Database to do so on a daily basis.
(e) If Quest Diagnostics or an Affiliate of Quest Diagnostics
deletes any field from the Quest Informatics Database or the SBCL Informatics
Database which field is marked with an asterisk on Appendix A, SmithKline
Beecham may request in writing that Quest Diagnostics continue providing
SmithKline Beecham with the Laboratory Data relating to such field; PROVIDED
that SmithKline Beecham shall pay for all reasonable costs associated with
extracting such Data from the laboratory information and billing information
systems of Quest Diagnostics and its Affiliates and transmitting such Data to
SmithKline Beecham unless Quest Diagnostics or its Affiliates deleted such field
from, or failed to include such field in, the Quest Informatics Database or the
SBCL Informatics Database in violation of Section 7.02(a).
(f) Quest Diagnostics shall provide SmithKline Beecham, on at
least a monthly basis, with the then current schedule for each of its or its
Affiliates' laboratories with respect to such laboratories' transmission of
Laboratory Data for entry into the Quest Informatics
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Database and/or SBCL Informatics Database. This obligation shall be suspended
during any period that each such laboratory is transmitting laboratory data on a
daily basis.
SECTION 7.02. QUEST INFORMATICS DATABASE. (a) The current data
fields embodied in the Quest Informatics Database and SBCL Informatics Database
are set forth in Appendix A, which Appendix shall be updated from time to time
by Quest Diagnostics to reflect changes in such data fields. Quest Diagnostics
shall notify SmithKline Beecham in writing at least 30 days in advance of any
changes in the data fields embodied in the Quest Informatics Database or the
SBCL Informatics Database which may impact Data provided to SmithKline Beecham
or the Information Encoder. Notwithstanding the foregoing, Quest Diagnostics
agrees not to, and to cause its Affiliates not to, delete any data fields from
the Quest Informatics Database or SBCL Informatics Database designated by an
asterisk on Appendix A unless Quest Diagnostics and its Affiliates do not
provide Laboratory Data relating to such fields to any Third Party in connection
with the Quest Diagnostics Informatics Business and Quest Diagnostics provides
SmithKline Beecham with 12 months' written notice (unless and to the extent such
sooner deletion is required by a change in Applicable Law). If, in the manner
permitted by the preceding sentence, Quest Diagnostics or an Affiliate of Quest
Diagnostics deletes any field from the Quest Informatics Database or the SBCL
Informatics Database which field is marked with an asterisk on Appendix A and
Quest Diagnostics or its Affiliates subsequently provide Laboratory Data
relating to such field to any Third Party in connection with the Quest
Diagnostics Informatics Business, such field shall be added back to the Quest
Informatics Database and the SBCL Informatics Database and shall be deemed added
back to Appendix A (marked with an asterisk).
(b) During the Term, Quest Diagnostics shall provide to
SmithKline Beecham documentation defining the data specifications, elements,
data fields and formats used by Quest Diagnostics and its Affiliates with
respect to Data. Quest Diagnostics and its Affiliates shall provide all
associated reference data needed to interpret the Laboratory Data. All
Laboratory Data shall be linked in such a way that all relationships among data
fields and types are clearly and unambiguously established. During the Term,
Quest Diagnostics shall also provide SmithKline Beecham with a copy of any
available standard data dictionary that Quest Diagnostics or an Affiliate of
Quest Diagnostics maintains or uses with respect to the Laboratory Data and its
documentation on file layouts in connection with the Laboratory Data. Quest
Diagnostics will identify, maintain and make available a single point of contact
to assist SmithKline Beecham in resolving any questions regarding Data.
(c) SmithKline Beecham shall be entitled during the Term to
retain an independent Third Party (subject to Section 12.03 regarding
confidentiality) to audit, in accordance with Section 8.05, the procedures and
processes adopted by Quest Diagnostics for providing Data to SmithKline Beecham
and its Affiliates in accordance with the terms of this Agreement.
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SECTION 7.03. REPAIRS AND REPLACEMENTS. Upon the making of any
material repairs or replacements to Data, Quest Diagnostics agrees to promptly
inform SmithKline Beecham (and, to the extent necessary, the Information
Encoder) of such material repairs or replacements and to use reasonable
commercial efforts to assist SmithKline Beecham (and, to the extent necessary,
the Information Encoder) in making any corresponding repairs or replacements to
Data previously provided to SmithKline Beecham (and, if applicable, the
Information Encoder), including providing SmithKline Beecham (or to the extent
necessary, the Information Encoder) with such repaired or replaced Data. If
Quest Diagnostics becomes aware of any material or systematic repairs necessary
to maintain the accuracy of the Data, Quest Diagnostics shall promptly notify
SmithKline Beecham.
SECTION 7.04. MINIMUM DATA FIELDS. Notwithstanding anything to
the contrary in this Article VII, Quest Diagnostics agrees to collect, and to
cause its Affiliates to collect, during the Term, to the extent consistent with
the normal operations of providing Clinical Laboratory Services, Laboratory Data
relating to the data fields set forth in Appendix C.
SECTION 7.05. SERVICE LEVELS. (a) Quest Diagnostics agrees to
the specific service levels set forth in Appendix E for providing Data to
SmithKline Beecham pursuant to Sections 3.02 and/or 4.02 but only to the extent
such service levels are expressly applicable to Sections 3.02 and/or 4.02.
(b) To the extent that (i) SmithKline Beecham requests service
pursuant to Sections 3.02 and/or 4.02 in excess of any expressly applicable
limits specified in Appendix E or (ii) to the extent SmithKline Beecham's
request pursuant to Sections 3.02 and/or 4.02 does not fall within a category
for which there are specified service levels in this Agreement but which is of a
type comparable to the types of requests that are then serviced in the normal
course of the Quest Diagnostics Informatics Business, Quest Diagnostics agrees
to use commercially reasonable efforts to provide Laboratory Data to SmithKline
Beecham in satisfaction of such request in accordance with the normal business
practices of the Quest Diagnostics Informatics Business with respect to services
provided to its Clients; PROVIDED that Quest Diagnostics will not provide
services under the foregoing clause (ii) that are in addition to the services
contemplated by this Agreement (including Appendix E as then in effect) (such
additional services, "ADDITIONAL SERVICES"), other than the faster or more
frequent delivery of Data pursuant to Sections 3.02 and/or 4.02. Quest
Diagnostics will treat SmithKline Beecham no less favorably than any other
Client of the Quest Diagnostics Informatics Business in the normal course of
such business.
(c) To the extent that an applicable service level requested
by SmithKline Beecham for the provision of Data pursuant to Sections 3.02 and/or
4.02 is not specified on Appendix E as then in effect and is either (x) with
respect to a Renewal Term or (y) a request that
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is of a type that is not then serviced in the normal course of the Quest
Diagnostics Informatics Business or involves Additional Services, upon
SmithKline Beecham's request, Quest Diagnostics agrees to negotiate with
SmithKline Beecham in good faith for the purpose of determining such additional,
reasonably appropriate, service levels for providing Data to SmithKline Beecham
pursuant to Sections 3.02 and/or 4.02 and an adjustment to the price paid by
SmithKline Beecham pursuant to Section 8.01 solely to reflect the additional
service level to be provided by Quest Diagnostics (each such price adjustment to
be determined pursuant to Section 8.01(b) notwithstanding whether or not such
additional service level relates to an Applicable Period). The parties agree to
amend Appendix E from time to time to reflect such mutually agreed new service
levels and fees. If the parties cannot mutually agree on an applicable new
service level within 30 days of such request, the parties shall resolve such
dispute pursuant to Section 12.15.
ARTICLE VIII
FEES
SECTION 8.01. CATEGORY ONE USES. (a) INITIAL EIGHTEEN MONTHS
OF INITIAL TERM. During the period beginning on the Effective Date and ending on
the date immediately preceding the date on which Quest Diagnostics completes the
delivery to the Information Encoder or the Escrow Agent under Appendix F and to
SmithKline Beecham of all Historical Data in accordance with Section 6.04 and
Appendix F (the "COMMENCEMENT Date"), there shall be no charge for Category One
Uses of the Data. During the period beginning on the Commencement Date and
ending on the eighteen-month anniversary of the Effective Date, SmithKline
Beecham shall pay to Quest Diagnostics in advance and in full, promptly after
the Commencement Date, a fee of fifty thousand U.S. Dollars (US $50,000) per
month (prorated for any partial month based on the actual number of days
remaining in such month over the total number of days in such month) for such
period for Category One Uses of Data; provided that in no event shall the
aggregate fee for such period exceed $625,000.
(b) REMAINING TWENTY-FOUR MONTHS OF INITIAL TERM AND RENEWAL
TERMS. Subject to Section 8.01(c), for each twelve-month period during the
Initial Term, commencing on the eighteen-month and thirty-month anniversaries,
respectively, of the Effective Date, and for each Renewal Term, if the Term is
so extended by SmithKline Beecham (each such twelve-month period or Renewal
Term, an "APPLICABLE PERIOD"), SmithKline Beecham shall pay to Quest Diagnostics
for Category One Uses of Data a fee (the "APPLICABLE FEE") equal to the lowest
price charged in the twelve-month period preceding such Applicable Period by
Quest Diagnostics or its Affiliates to another Pharmaceutical Company for
similar use of laboratory data; PROVIDED that if Quest Diagnostics or its
Affiliates do not provide any other Pharmaceutical Company with similar use of
laboratory data, then the Applicable Fee shall be the lesser of (i) the
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fair market value of SmithKline Beecham's use of the Data during such Applicable
Period and (ii) the lowest price that Quest Diagnostics or one of its Affiliates
reasonably would charge a Pharmaceutical Company for similar use of the
laboratory data for such Applicable Period. The lowest price that Quest
Diagnostics or one of its Affiliates charges or reasonably would charge a
Pharmaceutical Company for similar use of laboratory data, as provided in the
foregoing sentence, shall be determined using as a reference the prices Quest
Diagnostics and its Affiliates charge other Clients that are Pharmaceutical
Companies for separate categories of laboratory data and separate uses of such
data, such as, without limitation, for use of patient identifiable laboratory
data, internal use of encoded laboratory data and use of encoded laboratory data
for programs, services and products. The use of Data under this Agreement shall
be valued based on, among other factors, such separate categories of laboratory
data and separate uses of such data provided for under this Agreement, the
provision of the Encoded Laboratory Data pursuant to Section 3.02 (it being
agreed that Quest Diagnostics would agree to a prospective reduction in the
volume of Data provided under Section 3.02 in order to reduce the fee for any
Applicable Period), the uses of the Data permitted pursuant to this Agreement,
the volume of Data to which SmithKline Beecham is entitled to receive under
Section 4.02 and any other services agreed to under Section 7.05(c) for the
Applicable Period. For each Applicable Period during the Initial Term, there
shall be no charge for Category One A Uses of the Data.
(c) Notwithstanding Section 8.01(b), the Applicable Fee for
any Applicable Period during the Initial Term shall not exceed $500,000 for such
Applicable Period. The $500,000 limitation under this Section 8.01(c) shall not
be evidence of the value of the delivery of the Encoded Laboratory Data (or the
use of the Encoded Laboratory Data for Category One A Uses) during any Renewal
Term.
(d) SmithKline Beecham and Quest Diagnostics, acting
reasonably and in good faith, shall seek to reach an agreement on the Applicable
Fee to apply for each Applicable Period not later than 90 days prior to the
start of such Applicable Period. If they reach agreement, such Applicable Fee
shall be binding on the parties for the entire Applicable Period, subject to any
adjustment in the Applicable Fee pursuant to Section 7.05. If they cannot timely
reach agreement on such Applicable Fee, then the Applicable Fee for the
twelve-month period of the Term immediately preceding the start of the
Applicable Period in dispute shall apply, pending resolution pursuant to Section
12.15. Payments of the Applicable Fee, whether final or pending resolution,
shall be made annually, in advance, on the first day of each Applicable Period.
Promptly and in any event within 30 days of the resolution of the Applicable Fee
to apply for such Applicable Period in dispute, either (i) Quest Diagnostics
shall refund to SmithKline Beecham any overpayment by it of the Applicable Fee
or (ii) SmithKline Beecham shall pay any remaining balance due of the Applicable
Fee to Quest Diagnostics, plus, in the case of each of the foregoing clauses (i)
and (ii), interest on the amount of such refund or balance due at the prime rate
published by Citibank, N.A. on the last business day of each month(s) during
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the period from the beginning of such Applicable Period and the date on which
the amount of the refund or additional balance due, as the case may be, is paid.
(e) (i) In connection with the determination of the Applicable
Fee pursuant to Section 8.01(b), during the Term Quest Diagnostics
shall provide SmithKline Beecham, subject to Section 12.03, with the
relevant terms of each other agreement entered into during the Term
pursuant to which Quest Diagnostics or its Affiliates provide another
Pharmaceutical Company use of laboratory data (or encoded laboratory
data) (an "OTHER QUEST DATA ACCESS AGREEMENT"). Quest Diagnostics may
exclude the name of such Pharmaceutical Company, project specific data
and anything that could reasonably identify the Pharmaceutical Company
or the project, including the drug or vaccine involved, but shall
include a brief description of its use of the laboratory data and/or
encoded laboratory data.
(ii) In connection with the determination of the Applicable
Fee pursuant to Section 8.01(b), during the Term, SmithKline Beecham
shall provide Quest Diagnostics, subject to Section 12.03, with the
terms related to its anticipated use of the Data and other information
that is reasonably necessary in order to determine the Applicable Fee
for each Applicable Period. SmithKline Beecham may exclude the names of
any of its Clients, project specific data and anything that could
reasonably identify its Clients or its projects, including any drug or
vaccine involved.
(f) If SmithKline Beecham and Quest Diagnostics have not
reached an agreement on the Applicable Fee to apply pursuant to Section 8.01(b)
for an Applicable Period on or prior to 90th day prior to the start of such
Renewal Term, then such dispute shall be resolved pursuant to Section 12.15. If
the dispute is arbitrated pursuant to Section 5 of Appendix D, the arbitrator
shall request that each party present the arbitrator with a proposed Applicable
Fee, which can be based on a fixed amount, volume of use, a royalty rate or any
other reasonable method or combination of methods. The arbitrator shall then
select that party's proposal that most closely approximates the Applicable Fee
due pursuant to Section 8.01(b), before giving effect to Section 8.01(c). The
arbitrator shall not select any other amount as the Applicable Fee unless the
arbitrator determines that either party has not complied with Section 8.01(e).
In selecting which proposal most closely approximates the Applicable Fee, the
arbitrator shall consider, in addition to the other considerations set forth in
Section 8.01, (i) for purposes of determining the fair market value of
SmithKline Beecham's use of the Data during such Applicable Period, any evidence
provided by the parties of the fair market value of SmithKline Beecham's use of
the Data, (ii) for purposes of determining the lowest price that Quest
Diagnostics charges or reasonably would charge a Pharmaceutical Company for
similar use of laboratory data for such Applicable Period, the Other Quest Data
Access Agreements provided to the arbitrator by the parties and (iii) such other
information as the arbitrator shall deem relevant. In comparing the terms of
this Agreement with the terms of other data access agreements, the arbitrator
shall compare the type and scope of use of laboratory data, the volume of use of
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laboratory data, the type of customer, the term of the applicable data access
agreement, when such agreement was entered into and any other factors the
arbitrator deems relevant.
SECTION 8.02. CURRENCY AND PAYMENT. All amounts due by
SmithKline Beecham to Quest Diagnostics under any provision of this Agreement
shall be payable in United States currency by electronic funds transfer (SWIFT)
to an account designated by Quest Diagnostics. Any obligation to pay shall only
be deemed fulfilled on the day on which the relevant amount of money is credited
to the aforesaid account. The fees specified in this Article VIII shall be
denominated in U.S. dollars. Quest Diagnostics shall be responsible on its own
account for its own corporate income taxes. In the event of a breach by Quest
Diagnostics that continues for thirty (30) days after SmithKline Beecham gives
Quest Diagnostics written notice setting forth the nature of such breach,
SmithKline Beecham may suspend payment of any amount due under Section 8.01
until Quest Diagnostics cures such breach.
SECTION 8.03. INTEREST. If SmithKline Beecham shall fail to
pay any amount specified under this Agreement after the due date thereof, the
amount owed shall bear interest at the prime rate published by Citibank, N.A. on
the last business day of the month(s) of the delay plus two (2) percentage
points, from the due date until paid; PROVIDED, HOWEVER, that, if this interest
rate is held to be unenforceable for any reason, the interest rate shall be the
maximum rate allowed by law at the time the payment is due.
SECTION 8.04. RECORDS. (a) SmithKline Beecham shall keep (and
ensure that its Affiliates shall keep) correct and complete records of account
containing all information required to compute and verify fees due to Quest
Diagnostics under this Agreement, to verify SmithKline Beecham's overall
compliance with the terms of this Agreement and to verify Authorization.
(b) Quest Diagnostics shall keep (and ensure that its
Affiliates shall keep) correct and complete records of account containing all
information required to verify Quest Diagnostics' overall compliance with the
terms of this Agreement.
SECTION 8.05. AUDIT BY SMITHKLINE BEECHAM. SmithKline Beecham
shall be entitled during the Term to retain an independent Third Party (which
shall execute a confidentiality agreement consistent with Section 12.03
reasonably acceptable to Quest Diagnostics) to audit, no more than once per year
at SmithKline Beecham's expense, to verify the compliance of any pricing scheme
proposed by Quest Diagnostics with the standards defined in this Article VIII
and Quest Diagnostics' compliance with the other terms of this Agreement. The
auditor is subject to approval by Quest Diagnostics, which approval shall not be
unreasonably withheld or delayed. The auditor shall be enabled to inspect only
those records reasonably relevant to Quest Diagnostics' compliance with the
terms of this Agreement. The auditor shall conduct its review during Quest
Diagnostics' normal business hours and without unreasonably interfering with
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Quest Diagnostics' normal operations. All information obtained by such auditor
shall be considered confidential and subject to Section 12.03 of this Agreement.
Such auditor shall provide to SmithKline Beecham only that information
reasonably required by SmithKline Beecham in order to verify Quest Diagnostics'
compliance with the terms of this Agreement and shall not provide any
information that would identify a Client of Quest Diagnostics or can be excluded
under Section 8.01(e). The auditor shall simultaneously provide to Quest
Diagnostics copies of all information collected from Quest Diagnostics.
SmithKline Beecham shall not under any circumstances disclose any information so
provided by such auditor to any Third Party, except as permitted by Section
12.03.
SECTION 8.06. AUDIT BY QUEST DIAGNOSTICS. Quest Diagnostics
shall be entitled during the Term to retain an independent Third Party (which
shall execute a confidentiality agreement consistent with Section 12.03
reasonably acceptable to SmithKline Beecham) to audit, no more than once per
year at Quest Diagnostics' expense, to verify SmithKline Beecham's compliance
with the terms of this Agreement. The auditor is subject to approval by
SmithKline Beecham, which approval shall not be unreasonably withheld or
delayed. The auditor shall be enabled to inspect only those records reasonably
relevant to SmithKline Beecham's compliance with the terms of this Agreement.
The auditor shall conduct its review during SmithKline Beecham's normal business
hours and without unreasonably interfering with SmithKline Beecham's normal
operations. All information obtained by such auditor shall be considered
confidential and subject to Section 12.03 of this Agreement. Such auditor shall
provide to Quest Diagnostics only that information reasonably required by Quest
Diagnostics in order to verify SmithKline Beecham's compliance with the terms of
this Agreement and shall not provide any information that would identify a
Client of SmithKline Beecham or can be excluded under Section 8.01(e). The
auditor shall simultaneously provide to SmithKline Beecham copies of all
information collected from SmithKline Beecham. Quest Diagnostics shall not under
any circumstances disclose any information so provided by such auditor to any
Third Party, except as permitted by Section 12.03.
ARTICLE IX
TERM AND TERMINATION
SECTION 9.01. INITIAL TERM. Unless renewed or otherwise
terminated, this Agreement shall terminate upon the expiration of the Initial
Term.
SECTION 9.02. RENEWAL. Unless this Agreement is otherwise
terminated, SmithKline Beecham shall have the option to renew this Agreement for
up to seven (7) successive one-year renewal terms (each such renewal term, a
"RENEWAL TERM"). SmithKline Beecham agrees to notify Quest Diagnostics in
writing of its intent to renew at least
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ninety (90) days prior to expiration of the Initial Term. Subject to Section
9.04, if no Renewal Term is elected by SmithKline Beecham prior to expiration of
the Initial Term or current Renewal Term, then this Agreement shall expire upon
expiration of the Initial Term, or the Renewal Term, as applicable, and, except
as expressly provided otherwise, all rights and obligations of the parties under
this Agreement, including the right to renew this Agreement, shall terminate.
SECTION 9.03. TERMINATION. Either party may terminate this
Agreement:
(a) If at any time the other party shall file in any court or
agency, pursuant to any statute or regulation of any state or country, a
petition in bankruptcy or insolvency or for reorganization or for an arrangement
or for the appointment of a receiver or trustee of such other party or of its
assets, or if the other party proposes a written agreement of composition or
extension of its debts, or if the other party shall be served with an
involuntary petition against it, filed in any insolvency proceeding, and such
petition shall not be dismissed within sixty (60) days after the filing thereof,
or if the other party shall propose or be a party to any dissolution or
liquidation, or if the other party shall make an assignment for the benefit of
creditors.
(b) In the event of a breach by the other party upon the
giving of thirty (30) days' written notice setting forth the nature of such
breach. However, if such breach is cured within the thirty (30) day period (or a
longer period where the nature of the breach is such that it is not curable
within thirty (30) days but actions to cure such breach within a reasonable
period of time have promptly been initiated and continue to be diligently
pursued, meeting reasonable milestones to cure), then such notice shall be
deemed to be withdrawn. Any dispute regarding this Section 9.03 shall be
resolved pursuant to Section 12.15.
SECTION 9.04. POST-TERM OBLIGATIONS. (a) Following the Term,
Quest Diagnostics agrees to continue to provide Data, as applicable, to
SmithKline Beecham otherwise in accordance the terms of this Agreement for up to
12 months following such expiration for the sole purpose of allowing SmithKline
Beecham to continue providing existing programs or services to Third Parties to
the extent SmithKline Beecham's contractual obligations as of the expiration of
the Term to provide such programs or services extend past the expiration of this
Agreement; PROVIDED, HOWEVER, that Quest Diagnostics has no such obligation in
the event Quest Diagnostics terminates this Agreement pursuant to Section 9.03.
Fees for providing such continued use of Data will be determined in accordance
with Article VIII as if such Data is being provided during a Renewal Term.
(b) Upon termination of this Agreement, both parties shall
have the right to retain any sums already paid by the other party hereunder, and
each party shall pay all sums accrued hereunder which are then due.
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(c) Upon termination of this Agreement, SmithKline Beecham,
its Affiliates and its sublicensees shall have the non-exclusive, perpetual,
royalty-free, worldwide right and license to use Data previously received by
them under Article III and/or Article IV.
(d) Expiration or termination of this Agreement in accordance
with the provisions hereof shall not limit remedies which may be otherwise
available in law or equity.
(e) Upon expiration or termination of this Agreement, this
Agreement shall be of no further force or effect, except for (i) any obligations
or liabilities of either party then accrued and unpaid or not performed and (ii)
Articles V and XI, and Sections 3.01, 4.01, 4.03, 12.03, 12.07, 12.15, 12.16,
12.17 and this Section 9.04 shall survive such expiration or termination.
Notwithstanding the foregoing, during the twelve-month period contemplated by
Section 9.04(a), the terms of this Agreement shall remain in effect except as
contemplated by this Section 9.04.
SECTION 9.05. SUSPENSION. If (a) SmithKline Beecham, its
Affiliates, the Information Encoder or any Person who obtained Data, directly or
indirectly, from SmithKline Beecham or any of its Affiliates has breached any
obligations contained in this Agreement related to patient confidentiality or
(b) a civil violation with respect to patient confidentiality attributable to
SmithKline Beecham, its Affiliates, the Information Encoder or any Person who
obtained Data, directly or indirectly, from SmithKline Beecham or any of its
Affiliates has occurred under this Agreement or (c) Quest Diagnostics reasonably
believes as a result of a change in Applicable Law or a new judicial or
administrative interpretation of existing Applicable Law binding on Quest
Diagnostics that a criminal violation with respect to patient confidentiality
attributable to SmithKline Beecham, its Affiliates, the Information Encoder or
any Person who obtained Data, directly or indirectly, from SmithKline Beecham or
any of its Affiliates has occurred under this Agreement (provided that (i) Quest
Diagnostics provides SmithKline Beecham with written notice of its determination
as promptly as reasonably practicable and (ii) Quest Diagnostics provides
SmithKline Beecham with a written opinion of counsel, reasonably qualified to
opine on the law of patient confidentiality, disclosures and use of healthcare
data, supporting Quest Diagnostics' contention), then in addition to its other
rights Quest Diagnostics, upon written notice to SmithKline Beecham, has the
right to immediately suspend the transmission of Patient Identifiers, Patient
Demographic Information and physician identification numbers to the Information
Encoder and the providing of Data to SmithKline Beecham solely to the extent
necessary to prevent the continuation of such breach or violation and only until
such time as (i) SmithKline Beecham puts in place a remedy reasonably acceptable
to Quest Diagnostics or (ii) Quest Diagnostics and SmithKline Beecham, each
acting reasonably and in good faith, agree that no such breach or violation or
change in Applicable Law has occurred. If, within 5 business days, SmithKline
Beecham and Quest Diagnostics cannot agree on the appropriate remedy or on
whether or not such alleged breach or violation has
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occurred, the parties shall resolve such dispute pursuant to Section 12.15. If
Quest Diagnostics suspends the provision of Data pursuant to the foregoing
clause (c), SmithKline Beecham shall not be obligated to pay the fees provided
in Section 8.01 for such suspended Data during the period of such suspension.
ARTICLE X
ASSIGNMENT AND CHANGE OF CONTROL
SECTION 10.01. ASSIGNMENT. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by SmithKline
Beecham or by Quest Diagnostics (other than by operation of law in connection
with a merger, or sale of substantially all the assets, of SmithKline Beecham or
Quest Diagnostics) without the prior written consent of the other party hereto;
PROVIDED, HOWEVER, that SmithKline Beecham or Quest Diagnostics may assign its
rights hereunder in whole and not in part to an Affiliate of such party without
the prior written consent of the other party; PROVIDED FURTHER, HOWEVER, that no
assignment shall limit or affect the assignor's obligations hereunder. In the
event that any such assignee ceases to be an Affiliate of the assignor, all
rights and obligations hereunder shall revert to the assignor. Any attempted
assignment in violation of this Section 10.01 shall be void. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party.
SECTION 10.02. CHANGE OF CONTROL. SmithKline Beecham shall
notify Quest Diagnostics promptly upon a Change of Control of SmithKline
Beecham. If a Change of Control of SmithKline Beecham occurs during the Initial
Term, the fees provided for in Section 8.01 shall immediately be adjusted so
that, over the remainder of the Initial Term, the fees are 50% of the amount
(prorated for a partial year and appropriately adjusted for any period exceeding
one year) that they would be for the remainder of the Initial Term (but without
application of the cap provided in Section 8.01(c)) plus $500,000 per year (pro
rated) for the remainder of the Initial Term. In addition, if a Change of
Control of SmithKline Beecham occurs at any time when this Agreement is in
effect and, over the twelve-month period immediately preceding such Change of
Control, on a pro forma basis, taking into account the Change of Control,
SmithKline Beecham and its Affiliates (or, if applicable, the successor
corporation to SmithKline Beecham and its Affiliates) records net revenue of
$250 million or more from providing Clinical Laboratory Services (excluding
Clinical Laboratory Information Services), Quest Diagnostics may terminate this
Agreement by providing notice at any time that is at least 18 months after the
date of such Change of Control unless SmithKline Beecham (or if applicable, its
successor corporation) and its Affiliates on or prior to the date of such notice
cease providing such Clinical Laboratory Services (excluding Clinical Laboratory
Information Services) either by selling the business or assets generating such
revenues to a Third Party or otherwise.
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ARTICLE XI
INDEMNIFICATION
SECTION 11.01. INDEMNIFICATION BY SMITHKLINE BEECHAM. Quest
Diagnostics, its Affiliates and their successors and permitted assigns, and the
officers, directors, employees and agents of Quest Diagnostics, its Affiliates
and their successors and permitted assigns, in accordance with Section 10.01
(each a "QUEST DIAGNOSTICS INDEMNIFIED PARTY"), shall be indemnified and held
harmless by SmithKline Beecham 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 Quest Diagnostics 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:
(a) the breach by SmithKline Beecham or any of its Affiliates
of any of the terms of this Agreement;
(b) the use or disclosure, by SmithKline Beecham or any of its
Affiliates, of any Data, whether or not in accordance with the terms of this
Agreement, but not the disclosure of Encoded Laboratory Data to SmithKline
Beecham or any of its Affiliates by Quest Diagnostics pursuant to this Agreement
(unless such disclosure is prohibited by the terms of an agreement entered into
by SBCL or its Affiliates prior to the Effective Date);
(c) the use or disclosure by any Third Party of any Data,
whether or not in accordance with the terms of this Agreement, when such Data
was obtained, directly or indirectly, from SmithKline Beecham or any of its
Affiliates, but not the disclosure of Encoded Laboratory Data to SmithKline
Beecham or any of its Affiliates by Quest Diagnostics pursuant to this Agreement
(unless such disclosure is prohibited by the terms of an agreement entered into
by SBCL or its Affiliates prior to the Effective Date); or
(d) any disclosure by the Information Encoder to any Person
(other than Quest Diagnostics) of any portion of the Master Encoding Key
Database in violation of Applicable Law or the terms of this Agreement;
PROVIDED that SmithKline Beecham shall not indemnify and hold harmless any Quest
Diagnostics Indemnified Party for any Loss to the extent arising out of or
resulting from such Quest Diagnostics Indemnified Party's negligence or wilful
misconduct, Quest Diagnostic's breach of this Agreement or from any inaccuracy
in the Data excluding Data in the SBCL Informatics
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Database in the form such Data and the SBCL Informatics Database existed on the
Effective Date; PROVIDED FURTHER that the provision of Data by Quest Diagnostics
under this Agreement shall not be deemed to be negligence. Nothing herein shall
be deemed to supersede SmithKline Beecham's indemnification obligation under the
Purchase Agreement with respect to testing performed by SBCL prior to the
Effective Date.
To the extent that a Quest Diagnostics Indemnified Party is
entitled under the terms of the applicable Authorization to indemnification or
to otherwise recover damages from a Client of Quest Diagnostics for any Losses
incurred by the Quest Diagnostics Indemnified Party for which SmithKline Beecham
also has an indemnification obligation under this Section 11.01 and such Client
is not the subject of an involuntary case or proceeding under federal or state
bankruptcy, insolvency, reorganization or other similar law, (i) the Quest
Diagnostics Indemnified Party shall seek, using commercially reasonable efforts,
to recover the full amount of such Losses from such Client before making any
claim against SmithKline Beecham under this Section 11.01 and (ii) SmithKline
Beecham shall be obligated to indemnify the Quest Diagnostics Indemnified Party
pursuant to this Section 11.01 for such Losses solely to the extent that such
Losses exceed the amount of indemnification or other damages recovered by the
Quest Diagnostics Indemnified Party from such Client, PROVIDED that the Quest
Diagnostics Indemnified Party has complied with its obligations under the
foregoing clause (i). For purposes of this Section 11.01, "commercially
reasonable efforts" shall include pursuing a claim for indemnification or to
otherwise recover damages from a Client of Quest Diagnostics until the matter is
finally determined by a court of competent jurisdiction, unless SmithKline
Beecham otherwise gives the Quest Diagnostics Indemnified Party its written
consent (which shall not be unreasonably withheld).
To the extent any obligation of SmithKline Beecham in this
Section 11.01 may be unenforceable, SmithKline Beecham 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 Quest Diagnostics
Indemnified Parties for which SmithKline Beecham has an indemnification
obligation under this Section 11.01.
SECTION 11.02. INDEMNIFICATION BY QUEST DIAGNOSTICS.
SmithKline Beecham, its Affiliates and their successors and permitted assigns,
and the officers, directors, employees and agents of SmithKline Beecham, its
Affiliates and their successors and permitted assigns, in accordance with
Section 10.01 (each a "SMITHKLINE BEECHAM INDEMNIFIED PARTY"), shall be
indemnified and held harmless by Quest Diagnostics for any and all Losses to the
extent arising out of or resulting from (i) the breach by Quest Diagnostics or
any of its Affiliates of any of the terms of this Agreement or (ii) any
inaccuracy in the Data excluding (A) Data in the SBCL Informatics Database in
the form such data and the SBCL Informatics Database existed on the Effective
Date and (B) Data transferred without error (to the extent such error relates to
the Loss) to the SBCL Informatics Database after the Effective Date solely to
the extent such Data relates
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to testing performed by SBCL on or prior to the Effective Date. To the extent
any obligation of Quest Diagnostics in this Section 11.02 may be unenforceable,
Quest Diagnostics 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 SmithKline Beecham Indemnified Parties for which Quest
Diagnostics has an indemnification obligation under this Section 11.02.
SECTION 11.03. CERTAIN PROCEDURES. (a) A Quest Diagnostics
Indemnified Party or SmithKline Beecham 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 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 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 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 this Article XI, such claim specified by the Indemnified
Party in such notice shall be conclusively deemed a liability of the
indemnifying party under this 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 12.16.
(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
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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 in a case where
the indemnifying party shall not have assumed the defense of such Third Party
Claim 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 11.04. ADJUSTMENTS; LIMITATIONS ON INDEMNITY. (a) Any
amount indemnified against under this Article XI 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
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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 11.04 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. The parties shall make any adjusting
payment between each other as is required under this Section 11.04 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) SmithKline Beecham shall not have any liability under this
Article XI or in connection with its breach of any other provision of this
Agreement for any consequential, punitive, indirect, special or incidental
damages incurred by any Quest Diagnostics Indemnified Party other than
consequential, punitive, indirect, special or incidental damages actually paid
to any third party by such Quest Diagnostics Indemnified Party.
(c) Quest Diagnostics shall not have any liability under this
Article XI or in connection with its breach of any other provision of this
Agreement for any consequential, punitive, indirect, special or incidental
damages incurred by any SmithKline Beecham Indemnified Party other than
consequential, punitive, indirect, special or incidental damages actually paid
to any third party by such SmithKline Beecham Indemnified Party.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.01. INTERPRETATION. (a) The headings contained in
this Agreement, in any Appendix hereto, and in the table of contents to this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All Appendices annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Appendix 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". 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 and Appendices shall be construed to refer to Articles,
Sections and Appendices of this Agreement.
(d) All references in this Agreement to Laboratory Data,
Encoded Laboratory Data and Data expressly exclude (i) Laboratory Data used by
SmithKline Beecham and/or its Affiliates pursuant to the Category Three Data
Access Agreement dated the date hereof, between SmithKline Beecham and Quest
Diagnostics and (ii) any other Laboratory Data not used by SmithKline Beecham
and/or its Affiliates pursuant to this Agreement.
SECTION 12.02. 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.
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SECTION 12.03. CONFIDENTIALITY. (a) During the Term of this
Agreement and for five (5) years thereafter, SmithKline Beecham and Quest
Diagnostics shall not, and shall ensure that their respective Affiliates do not,
use or disclose to Third Parties any confidential information received from the
other (disclosing) party, except as otherwise expressly permitted by this
Agreement, without first obtaining the written consent of the disclosing party.
This confidentiality obligation shall not apply to such information which is or
becomes a matter of public knowledge through no fault of the receiving party or
its Affiliates, or is in the rightful possession of the receiving party as of or
following the Effective Date, or is disclosed to the receiving party by a Third
Party having the right to do so, or is subsequently and independently developed
by employees of the receiving party or Affiliates thereof who had no knowledge
of the confidential information disclosed, or is required by law to be disclosed
(PROVIDED that to the extent feasible, the disclosing party is provided
reasonable advance notice of such disclosure and provided with an effective
opportunity to appear, protest, and seek to limit such disclosure). The parties
shall take all reasonable measures to assure that no unauthorized use or
disclosure is made to Third Parties by Affiliates to whom access to such
information is granted.
(b) Nothing herein shall be construed as preventing SmithKline
Beecham from disclosing any information received from Quest Diagnostics
hereunder to an Affiliate; PROVIDED that such Affiliate has undertaken a similar
written obligation of confidentiality to SmithKline Beecham with respect to the
confidential information. Nothing herein shall be construed as preventing Quest
Diagnostics from disclosing any information received from SmithKline Beecham
hereunder to an Affiliate; PROVIDED that such Affiliate has undertaken a similar
written obligation of confidentiality to Quest Diagnostics with respect to the
confidential information.
(c) SmithKline Beecham covenants for itself and its Affiliates
that they shall not use Data or any subportions thereof in any manner that
discloses or utilizes Patient Identifiers, in any way that violates any
Applicable Laws governing confidentiality of patient identifiable healthcare
information.
(d) Each party shall keep confidential, and shall cause its
Affiliates, officers, directors and employees to keep confidential and shall use
commercially reasonable efforts to cause its advisors to keep confidential, (i)
the existence of any notice delivered by a party hereto to another party hereto
in accordance with this Agreement and (ii) the content of any such notice,
except as required by Applicable Law and except for information which is
available to the public, or thereafter becomes available to the public other
than as a result of a breach of this Section 12.03(d). In the event disclosure
is required under Applicable Law, each party shall, and shall cause its
applicable Affiliate, officer, director or employee to, provide the other party
with prompt prior written notice of such requirement so that such party may seek
a protective order or
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other appropriate remedy, and otherwise cooperate in all commercially reasonable
respects in obtaining the same.
(e) Nothing in this Section 12.03 shall enlarge or diminish
any right or obligations undertaken by either party in any other provision of
this Agreement. To the extent that the general restrictions of this Section
12.03 conflict in any respect with any other specific provision of this
Agreement, that specific provision shall control.
SECTION 12.04. AMENDMENTS AND WAIVER OF PERFORMANCE. (a) No
amendment, modification or waiver in respect of this Agreement shall be
effective unless it (i) shall be in writing making specific reference to this
Agreement and setting forth the plan or intention to amend, modify or waive this
Agreement; and (ii) shall be signed by the parties hereto.
(b) The failure of either party at any time or times to
require performance of any provision hereof shall in no manner affect its rights
at a later time to enforce the same. No waiver by either party of any condition
or term in any one or more instances shall be construed as a further or
continuing waiver of such condition or term or of another condition or term.
SECTION 12.05. 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, other than the parties hereto and such assigns, any legal or equitable
rights hereunder.
SECTION 12.06. NOTICES. All notices or other communications
required or permitted to be given hereunder, except as provided in Sections
6.02(b) and 7.02(b), 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:
(a) if to Quest Diagnostics:
Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, NJ 07608
Attention: General Counsel
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(b) if to SmithKline Beecham,
SmithKline Beecham plc
One New Horizons Court
Middlesex TW8 9EP
Brentford, England
Attention: General Counsel
with copies to:
SmithKline Beecham Corporation
One Franklin Plaza
Philadelphia, PA 19102
Attention: U.S. General Counsel
SECTION 12.07. TRADEMARKS AND TRADE NAMES. SmithKline Beecham
shall not be permitted to use the trademarks or trade names of Quest Diagnostics
in connection with the use of Data or the distribution, marketing or sale of
programs or services which use Data without prior written approval of Quest
Diagnostics for each such use; PROVIDED that SmithKline Beecham shall be
permitted to properly identify Quest Diagnostics as the source of Data provided
that such identification is merely of Quest Diagnostics as the source of such
Data and is made in accordance with Quest Diagnostics' then current policy for
identifying itself (as provided in writing to SmithKline Beecham).
SECTION 12.08. CHANGE IN APPLICABLE LAW. In the event of a
change in or addition to any Applicable Law which has, or could reasonably be
expected to have, a material effect upon the access to or use of Data as
provided in this Agreement, then either party may give the other party notice of
the need for the parties to bring this Agreement into compliance with such
revised Applicable Law. Unless waived by the receiving party, the notifying
party shall support its contention of the need to amend this Agreement due to
the contended change in Applicable Law with a written legal opinion to such
effect from outside counsel reasonably qualified to opine on the law of patient
confidentiality, disclosures and use of health care data and reasonably
acceptable to the receiving party. If the parties agree that the change in or
addition to Applicable Law has occurred and that the Agreement must be brought
into compliance with such change or addition, the parties shall then negotiate
reasonably and in good faith to amend this Agreement solely to the extent
necessary to bring the terms of this Agreement into such compliance while
preserving to the extent possible the original intent of, and all the rights and
relative benefits of each party under, this Agreement. If, within five business
days, the parties can not mutually agree on whether or not a modification to the
Agreement is required pursuant to this Section 12.08 or on the terms of such
modification to this Agreement as
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contemplated by the immediately preceding sentence, such matter shall be
resolved pursuant to Section 12.15.
SECTION 12.09. DISENROLLMENT. SmithKline Beecham agrees (a) to
promptly notify Quest Diagnostics of any complaints by a Person concerning such
Person's inclusion in any product or service provided by SmithKline Beecham or
SmithKline Beecham's Affiliate pursuant to this Agreement and (b) to cooperate
with Quest Diagnostics in resolving such complaints in a commercially reasonable
manner, including without limitation promptly disenrolling any Person who so
requests. SmithKline Beecham shall promptly disenroll from inclusion in any
product or service provided by SmithKline Beecham or SmithKline Beecham's
Affiliate pursuant to this Agreement any Person who so requests, provided that
SmithKline Beecham may continue to use Data related to such Person for Category
One A Uses.
SECTION 12.10. 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 12.10; PROVIDED that receipt of copies of such
counterparts is confirmed.
SECTION 12.11. ENTIRE AGREEMENT. This Agreement contains the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter including, without limitation, the Purchase
Agreement and its Exhibits (including the "Summary of Terms - Data Access
Agreement"). 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.
SECTION 12.12. 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 12.13. FORCE MAJEURE. If the performance of any part
of this Agreement by either party, or of any obligation under this Agreement, is
prevented, restricted, interfered with or delayed by reason of any cause beyond
the reasonable control of the party obligated to perform (including any computer
system or connectivity failures), unless conclusive evidence to the contrary is
provided, the party so affected shall, upon giving written notice to the other
party, be excused from such performance to the extent of such prevention,
restriction,
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interference or delay, PROVIDED that the affected party shall use reasonable
commercial efforts to avoid or remove such causes of non-performance and shall
promptly continue performance at such time when such causes are removed. When
such circumstances arise, the parties shall negotiate in good faith what, if
any, modification of the terms of this Agreement may be required in order to
arrive at an equitable solution.
SECTION 12.14. RECORDING. Either party may, at any time,
record, register or otherwise notify this Agreement in appropriate governmental
or regulatory offices anywhere in the world, and the other party shall provide
reasonable assistance to such party at such party's expense in effecting such
recording, registering or notifying.
SECTION 12.15. DISPUTE RESOLUTION. (a) All controversies,
claims or disputes ("DISPUTES") that arise out of or relate to Articles VI, VII
and VIII, Sections 4.03, 5.04, 9.03, 9.05 and 12.08 and any other provision of
this Agreement which expressly provides that this Section 12.15 applies to such
provision shall be resolved in accordance with the provisions of Appendix D.
(b) Either party may elect to cause any Dispute that arises
out of or relates to Sections 4.03, 5.04, 9.03, 9.05, 12.08 or otherwise arises
out of or relates to a change in Applicable Law relating to patent
confidentiality or the suspension by Quest Diagnostics of the transmission of
Data to SmithKline Beecham to be resolved pursuant to Sections 3 and 6 of
Appendix D.
(c) The costs and expenses of an arbitration pursuant to
Section 6 of Appendix D of any Dispute that arises out of or relates to Section
7.05(c) or 8.01(b), and the related costs and expenses of each of the parties,
shall be borne by the "Losing" party unless the arbitrator or arbitrators
determine that another allocation of such costs and expenses is equitable.
SECTION 12.16. CONSENT TO JURISDICTION. Both SmithKline
Beecham and Quest Diagnostics irrevocably submit 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 or any
transaction contemplated hereby. Both SmithKline Beecham and Quest Diagnostics
agree 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. Both SmithKline Beecham and Quest Diagnostics
further agree that service of any process, summons, notice or document by U.S.
registered mail to each 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
12.16. Both SmithKline Beecham and Quest Diagnostics irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or
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the transactions contemplated hereby 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 waive and agree 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 12.17. WAIVER OF JURY TRIAL. Subject to their
obligations under Section 12.15, each of SmithKline Beecham and Quest
Diagnostics 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 or any
transaction contemplated hereby. Both SmithKline Beecham and Quest Diagnostics
(a) certify 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) acknowledge
that each of them and the other parties hereto have been induced to enter into
this Agreement by, among other things, the mutual waivers and certifications in
this Section 12.17.
SECTION 12.18. EQUITABLE RELIEF. (a) Quest Diagnostics
acknowledges that access to Laboratory Data and Encoded Laboratory Data for
SmithKline Beecham is a unique resource for which breach by Quest Diagnostics
could cause SmithKline Beecham immediate and irreparable harm and may entitle
SmithKline Beecham to preliminary, and permanent injunctive relief and other
equitable relief to remedy such breach or the threat of such a breach without
the necessity of proving actual damages.
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(b) SmithKline Beecham acknowledges SmithKline Beecham's
breach of the terms of this Agreement and the unauthorized disclosure of Data as
to which it has access under this Agreement could cause Quest Diagnostics
immediate and irreparable harm and under such circumstances may entitle Quest
Diagnostics to preliminary, and permanent injunctive relief and other equitable
relief to remedy such breach or the threat of such a breach without the
necessity of proving actual damages.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
SMITHKLINE BEECHAM PLC,
By /s/ Donald F. Parman
Name: Donald F. Parman
Title: Authorized Signatory
QUEST DIAGNOSTICS
INCORPORATED,
By /s/ Kenneth W. Freeman
Name: Kenneth W. Freeman
Title: Chief Executive Officer
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Exhibit 8
CATEGORY THREE
LABORATORY DATA ACCESS AGREEMENT
This CATEGORY THREE LABORATORY DATA ACCESS AGREEMENT (this
"AGREEMENT"), dated as of August 16, 1999, between SmithKline Beecham plc, a
public limited liability company organized under the laws of England
("SMITHKLINE BEECHAM"), and Quest Diagnostics Incorporated, a Delaware
corporation ("QUEST DIAGNOSTICS").
WHEREAS, SmithKline Beecham and Quest Diagnostics have entered
into a Stock and Asset Purchase Agreement, dated as of February 9, 1999 (the
"PURCHASE AGREEMENT"), pursuant to which SmithKline Beecham has agreed to sell,
and Quest Diagnostics has agreed to purchase, SmithKline Beecham's clinical
laboratories business, including 100% of the outstanding capital stock of SBCL,
Inc., a Delaware corporation ("SBCL"), and certain other assets, as further
described therein (the "TRANSACTION");
WHEREAS, the clinical laboratory data previously collected by
SBCL becomes the property of Quest Diagnostics pursuant to the Purchase
Agreement; and
WHEREAS, as a condition to completion of the Transaction,
SmithKline Beecham has required Quest Diagnostics to grant to SmithKline
Beecham, and Quest Diagnostics is willing to so grant to SmithKline Beecham,
certain non-exclusive and limited-use license rights on economically preferred
terms for a limited term for the clinical laboratory data identified herein.
WHEREAS, SmithKline Beecham and Quest Diagnostics have entered
into a Participation Agreement, dated as of the date hereof (the "PARTICIPATION
AGREEMENT"), pursuant to which SmithKline Beecham will form IX Company ("IX
COMPANY") and will grant Quest Diagnostics an initial 29.5% equity interest in
IX Company. IX Company may, among other activities, use the Data received under
this Agreement, together with other health care related data, to develop, market
and sell products and services under Category Three Uses.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein and in the Participation Agreement, and subject to
and on the terms and conditions set forth herein, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. (a) For purposes of this Agreement:
"AFFILIATE" means with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by, or is under common control
with, a 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; PROVIDED that (1) any
Person that performs Clinical Laboratory Services that generate revenues in any
fiscal year (as determined pursuant to generally accepted accounting principles
in the U.S.) exceeding $250,000,000 shall not be an Affiliate of SmithKline
Beecham for purposes of Articles III, IV and V and (2) after assignment of this
Agreement to IX Company as provided in Section 10.01(a), neither IX Company nor
any subsidiary of IX Company (collectively, the "IX ENTITIES") shall be an
Affiliate of SmithKline Beecham or its other Affiliates for purposes of Articles
III, IV and V. For purposes of the foregoing proviso, Clinical Laboratory
Services shall exclude Clinical Laboratory Information Services (provided that
the Person providing such Clinical Laboratory Information Services does not
perform and has not performed clinical laboratory, anatomic pathology or other
diagnostic testing services). SmithKline Beecham and Quest Diagnostics shall not
be deemed to be Affiliates of each other.
"APPLICABLE LAW" means, with respect to any jurisdiction, all
applicable statutes, laws, ordinances, rules, orders and regulations (to the
extent then in force and effect) of 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, having authority over an applicable Person in such jurisdiction.
"AUTHORIZED SUBCONTRACTOR" means, with respect to SmithKline
Beecham, any subcontractor of SmithKline Beecham or its Affiliates that agrees
in writing not to disclose to Third Parties Data received under this Agreement
except at the direction and on behalf of SmithKline Beecham.
"CATEGORY THREE USES" means any use of Data by SmithKline
Beecham and its Affiliates, provided that the utility of the program, service or
product using the Data, from the
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point of view of a reasonable user of such program, service or product, has been
materially enhanced by the inclusion of data, other than laboratory data,
sourced from SmithKline Beecham or any Third Party. For the avoidance of doubt,
nothing in this Agreement prohibits SmithKline Beecham and its Affiliates from
including laboratory data sourced from any Third Party in a program, service or
product under a Category Three Use.
"CLIENT" means (a) with respect to Quest Diagnostics and any
of its Affiliates, any Person for whom Quest Diagnostics or any of its
Affiliates is providing laboratory services that generates Laboratory Data and
(b) with respect to SmithKline Beecham and any of its Affiliates, any Person for
whom SmithKline Beecham or any of its Affiliates is providing Data pursuant to
this Agreement.
"CLINICAL LABORATORY INFORMATION SERVICES" means providing in
any manner, directly or indirectly, data or information products or services
which substantially consist of laboratory test results and/or related
information (other than initial reporting of laboratory test results and test
development and other similar research activities engaged in by Quest
Diagnostics or its Affiliates).
"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) including
the reports of test results, or providing to any unaffiliated Person, in any
manner, directly or indirectly, data or information products or services which
substantially consist of laboratory test results and/or related information.
"COMMENCEMENT DATE" means the eighteen-month anniversary of
the Effective Date.
"DATA" means Laboratory Data and Encoded Laboratory Data.
"EFFECTIVE DATE" means the date upon which this Agreement is
effective and shall be the Closing Date as defined in the Purchase Agreement.
"ENCODED LABORATORY DATA" means Laboratory Data that has been
encoded through the Encoding Process. Encoded Laboratory Data shall specifically
exclude Patient Identifiers.
"ENCODING KEY" means the unique randomly generated code
assigned by the Information Encoder in the Encoding Process which relates to a
specific person. An Encoding Key shall specifically exclude Encounter Numbers
(as defined in Appendix F).
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"ENCODING PROCESS" means the process and procedures described
in Article VI.
"HEALTH INFORMATION" means that portion of Laboratory Data
that is medical and clinical information associated with any individual person
that relates to the past, present or future (a) physical or mental health
condition of the person, (b) family history of the person, (c) provision of
healthcare to the individual and (d) date of service. Health Information shall
specifically exclude Patient Identifiers and shall specifically include
Encounter Numbers.
"HISTORICAL DATA" means Laboratory Data entered into a
database prior to the Effective Date.
"INFORMATION ENCODER" means that independent Third Party
retained by SmithKline Beecham to perform the duties of the Encoding Process as
described in Article VI.
"INITIAL TERM" means, unless and until earlier terminated
pursuant to this Agreement, the period beginning on the Effective Date and
ending on the 42-month anniversary of the Effective Date.
"IX COMPETITOR" means a Third Party who is primarily engaged
in the business of developing, marketing, selling and delivering, via the
Internet, programs, services and products using patient specific health
information or, if IX Company is not primarily engaged in such business, a Third
Party primarily engaged in the business then primarily engaged in by IX Company.
"LABORATORY DATA" means and consists of clinical laboratory
data and associated person specific data and other information related to
Clinical Laboratory Services performed by SBCL, Quest Diagnostics or their
Affiliates, but expressly excluding Data that (a) is generated by clinical
trials and forensic toxicology or (b) relates to Clinical Laboratory Services
performed prior to January 1, 1998, by Quest Diagnostics and its Affiliates
(excluding SBCL and its subsidiaries) or prior to January 1, 1997, by SBCL and
its subsidiaries.
"PATIENT DEMOGRAPHIC INFORMATION" means (a) with respect to
any Person, the following person-associated information: date of birth, age,
gender and 5-digit zip code, and (b) with respect to any Person's test order,
laboratory requisition number and identity of the performing laboratory.
"PATIENT IDENTIFIERS" means with respect to any Person, name,
street address, 9-digit zip code, communication numbers (telephone, facsimile,
pager, e-mail), Social Security number and patient benefit member identification
numbers.
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"PERSON" means any individual, firm, corporation, partnership,
limited partnership, limited liability company, trust, joint venture, government
entity or other entity.
"QUEST DIAGNOSTICS INFORMATICS BUSINESS" means any business or
businesses conducted by Quest Diagnostics or its Affiliates, pursuant to which
Quest Diagnostics or any of its Affiliates provides Clinical Laboratory
Information Services using laboratory data from testing services performed by
Quest Diagnostics and its Affiliates.
"QUEST INFORMATICS DATABASE" means the compilation of
Laboratory Data in the centralized clinical laboratory database maintained by
Quest Diagnostics or its Affiliates on the Effective Date, and any comparable or
successor database or databases maintained by Quest Diagnostics or its
Affiliates in connection with the conduct of Clinical Laboratory Information
Services by Quest Diagnostics or its Affiliates.
"SBCL INFORMATICS DATABASE" means the compilation of
Laboratory Data in the centralized clinical laboratory database maintained by
SBCL or its subsidiaries on the Effective Date and any comparable or successor
database or databases maintained by Quest Diagnostics or its Affiliates in
connection with the conduct of Clinical Laboratory Information Services by Quest
Diagnostics or its Affiliates.
"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 ss.59A of
the Internal Revenue Code), 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.
"TERM" means, unless and until earlier terminated pursuant to
this Agreement, the Initial Term and any applicable Renewal Term in accordance
with Article IX.
"THIRD PARTY" means any party other than SmithKline Beecham
and Quest Diagnostics and their respective Affiliates.
"YEAR 2000 COMPLIANCE" includes any requirement that the
design and performance specifications of the relevant items include: accurate
date and century recognition, calculations that accommodate same century and
multicentury formulas and date values, and date/data interface values that
accurately reflect the century.
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(b) The following terms have the meanings set forth in the
Sections set forth below:
Term Section
- ---- -------
Additional Services............................................ 7.05(b)
Agreement...................................................... Preamble
Applicable Fee................................................. 8.01(a)
Applicable Period.............................................. 8.01(b)
Authorization.................................................. 4.02(a)
Data File 1.................................................... Appendix F
Data File 2.................................................... Appendix F
Deliverables................................................... 6.06
Disputes....................................................... 12.15(a)
Encoder Contract............................................... 6.01(b)
Encounter Number............................................... Appendix F
Indemnified Party.............................................. 11.03(a)
IX Company..................................................... Preamble
Loss........................................................... 11.01
Master Encoding Key Database................................... 6.03(b)
Other Quest Data Access Agreement.............................. 8.01(d)
Participation Agreement........................................ Preamble
Protocols...................................................... 6.02(c)
Purchase Agreement............................................. Preamble
Quest Diagnostics.............................................. Preamble
Quest Diagnostics Indemnified Party............................ 11.01
Renewal Term................................................... 9.02
SBCL........................................................... Preamble
SmithKline Beecham............................................. Preamble
SmithKline Beecham Indemnified Party........................... 11.02
Source Identifier.............................................. Appendix F
Superior Internal Service Level................................ 7.05(d)
Superior Service Level......................................... 7.05(d)
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Third Party Claims............................................. 11.03(b)
Transaction.................................................... Preamble
ARTICLE II
RIGHTS IN DATA
SECTION 2.01. RIGHTS IN DATA. The Laboratory Data to be
disclosed to SmithKline Beecham for use by SmithKline Beecham is proprietary
information of Quest Diagnostics. SmithKline Beecham's rights in the Data are
defined solely by the Category Three Uses and the other terms, conditions and
limitations in this Agreement.
ARTICLE III
ENCODED LABORATORY DATA
SECTION 3.01. CATEGORY THREE USES. Quest Diagnostics hereby
grants to SmithKline Beecham and its Affiliates a non-exclusive, perpetual,
worldwide right and license to use Encoded Laboratory Data received under
Section 3.02 for Category Three Uses, including the rights to receive, copy,
transfer, sublicense, manipulate, integrate, disclose and display, subject to
the terms and conditions of this Agreement. SmithKline Beecham, without
Authorization, shall have no right to directly or indirectly attempt to match or
link Encoded Laboratory Data with Patient Identifiers and shall refrain from
doing so.
SECTION 3.02. DELIVERY OF ENCODED LABORATORY DATA. During the
Term, if SmithKline Beecham requests Encoded Laboratory Data from Quest
Diagnostics, Quest Diagnostics shall, at the fees set forth in Article VIII,
electronically deliver, or deliver in electronic format, to a location in the
United States, Encoded Laboratory Data to SmithKline Beecham. Each transmission
of Encoded Laboratory Data shall be made in accordance with the performance
criteria set forth in Articles VI and VII, to the extent applicable, to one
recipient (which shall be SmithKline Beecham or an Affiliate or Authorized
Subcontractor designated by SmithKline Beecham).
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ARTICLE IV
LABORATORY DATA
SECTION 4.01. CATEGORY THREE USES. Quest Diagnostics hereby
grants to SmithKline Beecham and its Affiliates a non-exclusive, perpetual,
worldwide right and license to use Laboratory Data received under Section 4.02
for Category Three Uses, including the rights to receive, copy, transfer,
sublicense, manipulate, integrate, disclose and display, subject to
Authorization (as defined below) and the other terms and conditions of this
Agreement.
SECTION 4.02. REQUEST FOR LABORATORY DATA. (a) During the
Term, in the event that SmithKline Beecham requests Laboratory Data from Quest
Diagnostics and accompanies such request by a written or electronic
authorization (an "AUTHORIZATION") granted by a Person with authority to grant
SmithKline Beecham access to Laboratory Data (as further provided herein), Quest
Diagnostics shall provide, at the fees set forth in Article VIII, SmithKline
Beecham or its Affiliates (as applicable) with such Laboratory Data in
accordance with the Authorization and the terms and conditions of this
Agreement.
(b) Depending upon the terms of such Authorization, Quest
Diagnostics shall electronically deliver, or deliver in electronic format, to a
location in the United States, (i) the requested Laboratory Data or (ii) at
SmithKline Beecham's election in its sole discretion, the Encounter Numbers for
the Data covered by the Authorization, either to SmithKline Beecham or an
Affiliate or Authorized Subcontractor as designated in the Authorization. Any
such delivery shall be made in accordance with the performance criteria set
forth in Article VII to one recipient designated by SmithKline Beecham.
SECTION 4.03. AUTHORIZATION. Authorizations shall be
substantially in the form attached hereto as Appendix B, provided that
SmithKline Beecham may make reasonably appropriate drafting changes to tailor an
Authorization to a particular Client or circumstance. Quest Diagnostics may
revise Appendix B from time to time to reflect changes in its operating
procedures or in any Applicable Laws, subject to SmithKline Beecham's approval
not to be unreasonably withheld or delayed. Any dispute between the parties
regarding Appendix B shall be resolved pursuant to Section 12.15. Receipt of an
Authorization executed by (1) a patient or a Person representing himself or
herself to be the legal representative of such patient or (2) a health plan
representing itself to have authority over such patient's Laboratory Data shall
be sufficient for any purpose under this Agreement for which an Authorization is
required with respect to such patient's Laboratory Data. SmithKline Beecham
shall be responsible for obtaining, at its sole expense, valid Authorizations
for Category Three Uses of Laboratory Data under this Agreement.
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ARTICLE V
DISCLOSURE OF DATA
SECTION 5.01. CATEGORY THREE USES. (a) Quest Diagnostics
acknowledges that Clients of SmithKline Beecham and its Affiliates are not
restricted by this Agreement from disclosing Data via the Internet provided that
such disclosure complies with the other provisions of this Article V.
(b) Notwithstanding any provision to the contrary, SmithKline
Beecham shall delete that portion of the Data consisting of information that
identifies the health care payors (except to the extent the health care payor is
the patient or a family member of the patient) from any Data provided to a
Person that is not its Affiliate or Authorized Subcontractor except to the
extent (and only to the extent) that Data is provided to (i) the applicable
payor or provider or patient with respect to the Clinical Laboratory Services
covered by such Data, (ii) a governmental, regulatory or accrediting agency or
(iii) a Person entitled to receive such information as a matter of Applicable
Law.
(c) Any disclosure by SmithKline Beecham or its Affiliates of
Laboratory Data (that is not Encoded Laboratory Data) shall be consistent with
the terms of the applicable Authorization. Any disclosure by SmithKline Beecham
and its Affiliates of Data shall be in compliance with Applicable Law and the
terms of this Agreement.
SECTION 5.02. MOST FAVORED NATION TREATMENT REGARDING
DISCLOSURE RESTRICTIONS. Notwithstanding the provisions of Section 5.01, in the
event that Quest Diagnostics or its Affiliates shall provide any Data to an IX
Competitor, with confidentiality and/or disclosure restrictions less stringent
than those contemplated by Section 5.01, then Quest Diagnostics shall promptly
notify SmithKline Beecham of such less stringent restrictions, in which case
SmithKline Beecham shall have the right to disclose that same type of Data to
Third Parties subject to such less stringent restrictions rather than the
applicable restrictions provided in Section 5.01.
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ARTICLE VI
ENCODING
SECTION 6.01. SELECTION OF THE INFORMATION ENCODER. (a)
SmithKline Beecham shall be responsible for the selection of the Information
Encoder, subject to Quest Diagnostics' approval, which approval shall not be
unreasonably withheld or delayed. Quest Diagnostics shall be entitled to meet
with any prospective Information Encoder solely to review its procedures for
maintaining the confidentiality and security of Laboratory Data to be received
by the Information Encoder prior to giving its approval; provided, however, that
the ultimate discretion in such selection belongs to SmithKline Beecham.
(b) SmithKline Beecham shall be responsible for the
negotiation with and implementation of an agreement with the Information
Encoder. SmithKline Beecham shall ensure that the agreement between SmithKline
Beecham and the Information Encoder (the "ENCODER CONTRACT") shall meet the
requirements set forth in Section 6.07.
(c) SmithKline Beecham shall be responsible for all fees and
expenses of the Information Encoder.
SECTION 6.02. PROCEDURES AND PROTOCOLS. (a) The procedures and
protocols to be used by the Information Encoder are intended to facilitate
linkage by SmithKline Beecham of the Encoded Laboratory Data for a given
individual person as received from Quest Diagnostics or its Affiliates with
other anonymous or encoded medical or clinical healthcare information associated
with the same individual person, to which information SmithKline Beecham or its
Affiliates may otherwise have access. Such procedures and protocols shall be
compatible with Quest Diagnostics' data formats as of the Effective Date and
fields as specified in Appendix A.
(b) Quest Diagnostics shall provide to the Information Encoder
and SmithKline Beecham copies of documentation relating to the data
specifications, elements and fields and formats used by Quest Diagnostics and
its Affiliates with respect to Data. Quest Diagnostics shall provide the
Information Encoder and SmithKline Beecham with access to use any standard data
dictionary that Quest Diagnostics or any Affiliate of Quest Diagnostics
maintains or uses with respect to the Laboratory Data and its documentation on
file layouts in connection with the Laboratory Data. Quest Diagnostics will
identify, maintain and make available a single point of contact to assist
SmithKline Beecham in resolving any questions regarding Data.
(c) The linking of individual data files, creation of the
Encoding Keys and the creation of the Master Encoding Key Database (as defined
below) shall be performed by the Information Encoder in accordance with the
processes and protocols provided to the Information Encoder by SmithKline
Beecham or its Affiliates from time to time (the "PROTOCOLS").
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Notwithstanding any other terms in this Agreement, in no event shall the
Protocols be shared with Quest Diagnostics or its Affiliates. In no event shall
SmithKline Beecham, Quest Diagnostics or any of their respective Affiliates
provide, without Authorization, any Laboratory Data other than Patient
Identifiers, Patient Demographic Information, Encoding Keys, Encounter Numbers,
Source Identifiers (as defined in Appendix F) and physician identification
numbers to the Information Encoder.
SECTION 6.03. USE OF INFORMATION. (a) The Information Encoder
shall be authorized to use the Patient Identifiers, Patient Demographic
Information, Encoding Keys, Encounter Numbers, Source Identifiers and physician
identification numbers solely for the purposes set forth in this Article VI.
(b) The Information Encoder shall be authorized to create and
maintain a database of the Patient Identifiers, Patient Demographic Information,
Encoding Keys, Encounter Numbers, Source Identifiers and physician
identification numbers provided by Quest Diagnostics ("MASTER ENCODING KEY
DATABASE") and shall be authorized to create a permanent encoding conversion
table for the individual files which links multiple individual fields for the
Patient Identifiers, Patient Demographic Information, Encoding Keys, Encounter
Numbers, Source Identifiers and physician identification numbers concerning an
individual, while maintaining individual accessibility of each data file
provided. The Information Encoder is authorized to use such Master Encoding Key
Database (subject to the terms of this Agreement, particularly regarding patient
confidentiality and Authorization) to link Encoding Keys to such individual data
files regarding the same individual and to link other demographic data to the
Encoding Key. The Information Encoder may make copies of the Master Encoding Key
Database or portions thereof, provided that the Master Encoding Key Database and
such copies are maintained by the Information Encoder under its control in
secure settings at all times.
SECTION 6.04. HISTORICAL DATA ENCODING. Quest Diagnostics (a)
will provide to the Information Encoder Patient Identifiers, Patient Demographic
Information, physician identification numbers, Encounter Numbers and Source
Identifiers from the Historical Data and (b) will provide to SmithKline Beecham,
or an Affiliate or Authorized Subcontractor of SmithKline Beecham, Laboratory
Data from the Historical Data, with the corresponding Patient Identifiers
deleted, in each case in accordance with Appendix F.
SECTION 6.05. ONGOING DATA ENCODING. Using the same
methodology and programming developed for the encoding of Historical Data
pursuant to the Encoding Process described on Appendix F (but using the service
levels provided in this Section 6.05), Quest Diagnostics no less frequently than
daily (for this purpose, six days a week or seven days a week if the normal
course of business) (with respect to the SBCL Informatics Database, weekly until
updated more frequently as provided in Section 7.01(d), at which point at least
as frequently as the SBCL Informatics Database is updated) shall send (a) to the
Information Encoder a Data
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File 1 and (b) to SmithKline Beecham or an Affiliate or Authorized Subcontractor
of SmithKline Beecham a Data File 2, in each case generated by Quest Diagnostics
and its Affiliates from the Quest Informatics Database and the SBCL Informatics
Database, commencing with the most recent submission under this Section 6.05 (or
in the case of the first submission under this Section 6.05, commencing with all
Laboratory Data since the most recent Laboratory Data included in the Historical
Data). The Information Encoder will deliver to SmithKline Beecham the Encoding
Keys created using the Encoding Process together with the corresponding
Encounter Numbers in Data File 1.
SECTION 6.06. COSTS AND EXPENSES. SmithKline Beecham shall
reimburse Quest Diagnostics for all reasonable costs and expenses to the extent
associated with the setup of the processes to transfer and process to the
Information Encoder and SmithKline Beecham (including initial extraction of, but
not for ongoing extraction of) Patient Identifiers, Patient Demographic
Information, Encounter Numbers, Source Identifiers, physician identification
numbers and Laboratory Data in accordance with this Article VI (the
"DELIVERABLES"), including but not limited to costs of acquiring and installing
required hardware and disk space, programming costs, interface development
costs, line charges, and any other such costs and expenses ; PROVIDED that
SmithKline Beecham shall not be obligated to reimburse Quest Diagnostics more
than $90,000 pursuant to this Section 6.06. Quest Diagnostics shall be
responsible for all costs and expenses relating to the Deliverables in excess of
$90,000 and all costs and expenses associated with the ongoing processes to
transfer and process to the Information Encoder and SmithKline Beecham
(including ongoing extraction of) the Laboratory Data.
SECTION 6.07. INFORMATION ENCODER CONTRACT. The Encoder
Contract shall meet the following requirements:
(a) The Encoder Contract shall incorporate the duties of the
Information Encoder as set forth in this Article VI, and the relevant
definitions from Article I, including the definitions for Encoded Laboratory
Data, Patient Identifiers, Encoding Keys, Encounter Numbers, Source Identifiers
and Patient Demographic Information.
(b) The Information Encoder shall be subject to the terms of
Section 12.03 regarding confidentiality.
(c) The Information Encoder shall be prohibited from assigning
the Encoder Contract without Quest Diagnostics' consent, which shall not be
unreasonably withheld or delayed.
(d) If the Information Encoder's performance under the Encoder
Contract materially breaches the provisions of this Article VI and such breach
is not cured within 30 days of SmithKline Beecham's receipt of written notice of
such breach from Quest Diagnostics or, if
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such breach is not of a type that can reasonably be cured within such period,
within 90 days of SmithKline Beecham's receipt of written notice of such breach
from Quest Diagnostics (notwithstanding that the Information Encoder is working
diligently to cure such breach), then Quest Diagnostics may suspend the delivery
of Patient Identifiers, Patient Demographic Information, Encounter Numbers,
Source Identifiers and physician identification numbers to the Information
Encoder pursuant to this Article VI. Any such suspension shall be pursuant and
subject to the provisions of Section 9.05. SmithKline Beecham shall notify Quest
Diagnostics promptly if it becomes aware that the Information Encoder's
performance under the Encoding Contract materially breaches the provisions of
this Article VI.
(e) The Encoder Contract shall provide that, in consideration
of Quest Diagnostics' provision of Patient Identifiers, Patient Demographic
Information, Encounter Numbers and physician identification numbers to the
Information Encoder, Quest Diagnostics shall have the right to exercise audit
rights with respect to the Information Encoder during normal business hours,
without unreasonably interfering with the Information Encoder's business and at
Quest Diagnostics' expense (and that SmithKline Beecham shall be empowered to
and shall enforce said rights of Quest Diagnostics). Such audit rights shall be
limited solely to the right to review the Encoder Contract and to verify the
Information Encoder's compliance with the applicable terms of this Article VI
and Section 12.03.
(f) Upon the termination of the Encoder Contract, the
Information Encoder either shall transfer all its files relating to the Master
Encoding Key Database to a successor Information Encoder that has entered into
an Encoder Contract with SmithKline Beecham that meets the requirements of this
Section 6.07 or, in the event that no Information Encoder is appointed, either
destroy all its files relating to the Master Encoding Key Database (and certify
to Quest Diagnostics that they have been destroyed) or deliver such files to
Quest Diagnostics. Notwithstanding the foregoing, the Information Encoder and
SmithKline Beecham shall be permitted to retain a copy of any portion of the
Patient Identifiers and Patient Demographic Information that is generally
available from third party sources without violation of Applicable Law; PROVIDED
such information is maintained in a format that is not linked with the Master
Encoding Key Database or any Encoding Keys or otherwise could reasonably be
expected to link Patient Identifiers with the applicable patients' Health
Information. Such information only may be retained and used for the benefit of
SmithKline Beecham and its Affiliates.
(g) Except as permitted by Section 6.07(f) or this Section
6.07(g), under no circumstances will the Information Encoder provide to
SmithKline Beecham or its Affiliates or any Person other than Quest Diagnostics
the Master Encoding Key Database or Encoding Keys in any format that could
reasonably be expected to permit such Person to link Patient Identifiers with
the applicable patient's Health Information. Notwithstanding the foregoing, in
the event that SmithKline Beecham or its Affiliates have delivered to the
Information Encoder an Authorization, then the Information Encoder may provide
to SmithKline Beecham or its
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Affiliates the Encoding Keys, together with the Patient Identifiers and Patient
Demographic Information, covered by the Authorization. In such event, the
Information Encoder shall deliver to Quest Diagnostics, by electronic or other
means, a copy of the applicable authorization within five business days of the
date on which the Information Encoder delivered such Encoding Keys, Patient
Identifiers and Patient Demographic Information to SmithKline Beecham or its
Affiliates; PROVIDED that in the event of an Authorization from a healthcare
payor (other than a payor who is the applicable patient or a family member of
the patient), SmithKline Beecham shall deliver to Quest Diagnostics, by
electronic or other means, a copy of the applicable Authorization not later than
two business days after the date on which SmithKline Beecham delivers such
Authorization to the Information Encoder and notice that SmithKline Beecham has
requested the Information Encoder to deliver such Encoding Keys, Patient
Identifiers and Patient Demographic Information to SmithKline Beecham or its
Affiliates.
ARTICLE VII
QUALITY OF DATA AND SERVICE LEVELS
SECTION 7.01. QUALITY OF DATA. (a) Except as expressly set
forth in this Agreement, Quest Diagnostics makes no representation or warranty
with respect to the quality of any Data provided to SmithKline Beecham pursuant
to this Agreement and shall provide such Data on an "as is" basis including,
without limitation, (i) any representation or warranty regarding Year 2000
Compliance or (ii) any warranty of merchantability or fitness of use; PROVIDED,
HOWEVER, that Quest Diagnostics will use reasonable commercial efforts to
maximize the accuracy of Data and to cause Laboratory Data relating to Clinical
Laboratory Services performed by Quest Diagnostics or its Affiliates after the
Effective Date to be in Year 2000 Compliance. Any efforts made by Quest
Diagnostics or its Affiliates in the normal course of the Quest Diagnostics
Informatics Business to improve the accuracy of the Data also shall be made for
SmithKline Beecham and its Affiliates pursuant to this Agreement.
(b) Quest Diagnostics makes no commitment to continue in the
Quest Diagnostics Informatics Business. If Quest Diagnostics and its Affiliates
exit the Quest Diagnostics Informatics Business and no longer maintain the Quest
Informatics Database and/or the SBCL Informatics Database, then Quest
Diagnostics shall provide the Laboratory Data on a "where is" as well as "as is"
basis with SmithKline Beecham to pay for all reasonable costs associated with
extracting Data from the laboratory information and billing information systems
of Quest Diagnostics and its Affiliates and transmitting such Data to SmithKline
Beecham; PROVIDED that Quest Diagnostics shall only be obligated to provide
SmithKline Beecham with Data relating to the data fields set forth on Appendix A
as of the date hereof plus Data relating to any data fields added to Appendix A
after the date hereof, but, subject to Section 7.04, only to the extent that
Quest Diagnostics and its Affiliates collect such Laboratory Data in the course
of
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performing Clinical Laboratory Services. In furtherance of this Section 7.01(b)
and Section 7.01(e), Quest Diagnostics agrees to use commercially reasonable
efforts to accommodate, at SmithKline Beecham's expense, reasonable requests for
any cleaning, collecting and/or transmitting of Laboratory Data, including to
facilitate encoding pursuant to Article VI.
(c) Unless (i) Quest Diagnostics or its Affiliates no longer
maintain the Quest Informatics Database and/or the SBCL Informatics Database or
(ii) Quest Diagnostics is in breach of its obligations set forth in Section
7.01(d) or (e) or Section 7.02(a), Quest Diagnostics' obligation to use
Laboratory Data to create Encoded Laboratory Data pursuant to Article VI for
delivery to SmithKline Beecham pursuant to Section 3.02 and its obligation to
deliver Laboratory Data to SmithKline Beecham pursuant to Section 4.02 shall be
limited to the Laboratory Data residing in electronic format in the Quest
Informatics Database and/or the SBCL Informatics Database, except to the extent
provided in Section 7.01(e).
(d) So long as Quest Diagnostics or its Affiliates conduct the
Quest Diagnostics Informatics Business, Quest Diagnostics shall cause the Quest
Informatics Database and the SBCL Informatics Database:
(i) to be updated, (A) in the case of the Quest Informatics
Database on a daily basis (at least five days a week) and (B) in the
case of the SBCL Informatics Database no less frequently than on a
weekly basis, with all Laboratory Data then reasonably available
relating to at least the fields then set forth on Appendix A (but in no
event relating to less than the fields set forth on Appendix A) and
generated by Quest Diagnostics or its Affiliates since the previous
time as of which such database or databases have been so updated, and
(ii) to include in a timely fashion Laboratory Data with
respect to substantially all Clinical Laboratory Services (excluding
Clinical Laboratory Information Services) performed by Quest
Diagnostics and its Affiliates during the preceding three-year period
(but in any event after January 1, 1998).
Without limiting Section 7.01(d)(i), Quest Diagnostics shall use reasonable
commercial efforts to cause the SBCL Informatics Database to be updated pursuant
to the foregoing clause (i) on a daily basis (at least five days a week). Quest
Diagnostics shall use commercially reasonable efforts to cause the Quest
Informatics Database and the SBCL Informatics Database to include, not later
than five days after the applicable laboratory test result is finally reported
to the applicable physician, Laboratory Data with respect to substantially all
Clinical Laboratory Services (excluding Clinical Laboratory Information
Services) performed by Quest Diagnostics and its Affiliates after the date
hereof, provided that, as of any date, Quest Diagnostics shall not be required
to cause such databases to include Laboratory Data with respect to Clinical
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Laboratory Services performed more than three years prior to such date. Quest
Diagnostics shall use commercially reasonable efforts to cause each laboratory
that transmits Laboratory Data for entry into the Quest Informatics Database
and/or the SBCL Informatics Database to do so on a daily basis.
(e) If Quest Diagnostics or an Affiliate of Quest Diagnostics
deletes any field from the Quest Informatics Database or the SBCL Informatics
Database which field is marked with an asterisk on Appendix A, SmithKline
Beecham may request in writing that Quest Diagnostics continue providing
SmithKline Beecham with the Laboratory Data relating to such field; PROVIDED
that SmithKline Beecham shall pay for all reasonable costs associated with
extracting such Data from the laboratory information and billing information
systems of Quest Diagnostics and its Affiliates and transmitting such Data to
SmithKline Beecham unless Quest Diagnostics or its Affiliates deleted such field
from, or failed to include such field in, the Quest Informatics Database or the
SBCL Informatics Database in violation of Section 7.02(a).
(f) Quest Diagnostics shall provide SmithKline Beecham, on at
least a monthly basis, with the then current schedule for each of its or its
Affiliates' laboratories with respect to such laboratories' transmission of
Laboratory Data for entry into the Quest Informatics Database and/or SBCL
Informatics Database. This obligation shall be suspended during any period that
each such laboratory is transmitting laboratory data on a daily basis.
SECTION 7.02. QUEST INFORMATICS DATABASE. (a) The current data
fields embodied in the Quest Informatics Database and SBCL Informatics Database
are set forth in Appendix A, which Appendix shall be updated from time to time
by Quest Diagnostics to reflect changes in such data fields. Quest Diagnostics
shall notify SmithKline Beecham in writing at least 30 days in advance of any
changes in the data fields embodied in the Quest Informatics Database or the
SBCL Informatics Database which may impact Data provided to SmithKline Beecham
or the Information Encoder. Notwithstanding the foregoing, Quest Diagnostics
agrees not to, and to cause its Affiliates not to, delete any data fields from
the Quest Informatics Database or SBCL Informatics Database designated by an
asterisk on Appendix A unless Quest Diagnostics and its Affiliates do not
provide Laboratory Data relating to such fields to any Third Party in connection
with the Quest Diagnostics Informatics Business and Quest Diagnostics provides
SmithKline Beecham with 12 months' written notice (unless and to the extent such
sooner deletion is required by a change in Applicable Law). If, in the manner
permitted by the preceding sentence, Quest Diagnostics or an Affiliate of Quest
Diagnostics deletes any field from the Quest Informatics Database or the SBCL
Informatics Database which field is marked with an asterisk on Appendix A and
Quest Diagnostics or its Affiliates subsequently provide Laboratory Data
relating to such field to any Third Party in connection with the Quest
Diagnostics Informatics Business, such field shall be added back to the Quest
Informatics Database and the SBCL Informatics Database and shall be deemed added
back to Appendix A (marked with an asterisk).
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(b) During the Term, Quest Diagnostics shall provide to
SmithKline Beecham documentation defining the data specifications, elements,
data fields and formats used by Quest Diagnostics and its Affiliates with
respect to Data. Quest Diagnostics and its Affiliates shall provide all
associated reference data needed to interpret the Laboratory Data. All
Laboratory Data shall be linked in such a way that all relationships among data
fields and types are clearly and unambiguously established. During the Term,
Quest Diagnostics shall also provide SmithKline Beecham with a copy of any
available standard data dictionary that Quest Diagnostics or an Affiliate of
Quest Diagnostics maintains or uses with respect to the Laboratory Data and its
documentation on file layouts in connection with the Laboratory Data. Quest
Diagnostics will identify, maintain and make available a single point of contact
to assist SmithKline Beecham in resolving any questions regarding Data.
(c) SmithKline Beecham shall be entitled during the Term to
retain an independent Third Party (subject to Section 12.03 regarding
confidentiality) to audit, in accordance with Section 8.05, the procedures and
processes adopted by Quest Diagnostics for providing Data to SmithKline Beecham
and its Affiliates in accordance with the terms of this Agreement.
SECTION 7.03. REPAIRS AND REPLACEMENTS. Upon the making of any
material repairs or replacements to Data, Quest Diagnostics agrees to promptly
inform SmithKline Beecham (and, to the extent necessary, the Information
Encoder) of such material repairs or replacements and to use reasonable
commercial efforts to assist SmithKline Beecham (and, to the extent necessary,
the Information Encoder) in making any corresponding repairs or replacements to
Data previously provided to SmithKline Beecham (and, if applicable, the
Information Encoder), including providing SmithKline Beecham (or to the extent
necessary, the Information Encoder) with such repaired or replaced Data. If
Quest Diagnostics becomes aware of any material or systematic repairs necessary
to maintain the accuracy of the Data, Quest Diagnostics shall promptly notify
SmithKline Beecham.
SECTION 7.04. MINIMUM DATA FIELDS. Notwithstanding anything to
the contrary in this Article VII, Quest Diagnostics agrees to collect, and to
cause its Affiliates to collect, during the Term, to the extent consistent with
the normal operations of providing Clinical Laboratory Services, Laboratory Data
relating to the data fields set forth in Appendix C.
SECTION 7.05. SERVICE LEVELS. (a) Quest Diagnostics agrees to
the specific service levels set forth in Appendix E for providing Data to
SmithKline Beecham pursuant to Sections 3.02 and/or 4.02 but only to the extent
such service levels are expressly applicable to Sections 3.02 and/or 4.02.
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(b) To the extent that (i) SmithKline Beecham requests service
pursuant to Sections 3.02 and/or 4.02 in excess of any expressly applicable
limits specified in Appendix E or (ii) to the extent SmithKline Beecham's
request pursuant to Sections 3.02 and/or 4.02 does not fall within a category
for which there are specified service levels in this Agreement but which is of a
type comparable to the types of requests that are then serviced in the normal
course of the Quest Diagnostics Informatics Business, Quest Diagnostics agrees
to use commercially reasonable efforts to provide Laboratory Data to SmithKline
Beecham in satisfaction of such request in accordance with the normal business
practices of the Quest Diagnostics Informatics Business, with respect to
services provided to its Clients; PROVIDED that Quest Diagnostics will not
provide services under the foregoing clause (ii) that are in addition to the
services contemplated by this Agreement (including Appendix E as then in effect)
(such additional services, "ADDITIONAL SERVICES"), other than the faster or more
frequent delivery of Data pursuant to Sections 3.02 and/or 4.02. Quest
Diagnostics will treat SmithKline Beecham no less favorably than any other
Client of the Quest Diagnostics Informatics Business in the normal course of
such business.
(c) To the extent that an applicable service level requested
by SmithKline Beecham for the provision of Data pursuant to Sections 3.02 and/or
4.02 is not specified on Appendix E as then in effect, upon SmithKline Beecham's
request, Quest Diagnostics agrees to negotiate with SmithKline Beecham in good
faith for the purpose of determining such additional, reasonably appropriate,
service level for providing Data to SmithKline Beecham pursuant to Sections 3.02
and/or 4.02 and an adjustment to the price paid by SmithKline Beecham pursuant
to Section 8.01 solely to reflect the additional service level to be provided by
Quest Diagnostics. The parties agree to amend Appendix E from time to time to
reflect such mutually agreed new service levels and fees. If the parties can not
mutually agree on an applicable new service level within 30 days of such
request, the parties shall resolve such dispute pursuant to Section 12.15.
(d) Notwithstanding anything to the contrary in this
Agreement, if Quest Diagnostics or its Affiliates provide to a Third Party any
service level which is superior to the service levels provided pursuant to this
Agreement to SmithKline Beecham and its Affiliates (a "SUPERIOR SERVICE LEVEL")
then Quest Diagnostics shall promptly provide SmithKline Beecham with notice of
such Superior Service Level and upon SmithKline Beecham's request (which request
shall be delivered by the earlier of (1) twelve months after delivery of notice
from Quest Diagnostics pursuant to this Section 7.05(d) and (2) the latter of
(x) the end of the then current Term and (y) thirty days after delivery of
notice from Quest Diagnostics pursuant to this Section 7.05(d)) this Agreement
shall be deemed amended to reflect such Superior Service Level and Quest
Diagnostics and its Affiliates promptly shall make such Superior Service Level
available to SmithKline Beecham and its Affiliates. If, in connection with a
program, service or product that is provided by Quest Diagnostics or an
Affiliate of Quest Diagnostics pursuant to which laboratory data is provided to
Third Parties, Quest Diagnostics or an Affiliate of Quest Diagnostics provides
itself or another Affiliate with any service level which is superior to the
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service levels provided pursuant to this Agreement to SmithKline Beecham and its
Affiliates (a "SUPERIOR INTERNAL SERVICE LEVEL"), then Quest Diagnostics shall
promptly provide SmithKline Beecham with notice of such Superior Internal
Service Level, and upon SmithKline Beecham's request (which request shall be
delivered within the time periods described in the preceding sentence) this
Agreement shall be deemed amended to reflect such Superior Internal Service
Level and Quest Diagnostics and its Affiliates promptly shall make such Superior
Internal Service Level available to SmithKline Beecham and its Affiliates. As
used herein "service level" means timeliness of delivery of Data (other than
initial reporting of laboratory test results) and number, manner and frequency
of Data updates and additional data fields related to Data. The foregoing
notwithstanding, in the event that Quest Diagnostics develops a unique product
or service for (i) internal use and not for supply or provision of service to a
Third Party, or (ii) sale or exclusive license to a single Third Party without
retention by Quest Diagnostics or its Affiliates of any residual interest in
such product or service, Quest Diagnostics shall have no obligation to offer
such unique product or service as an Additional Service to SmithKline Beecham.
Upon any request by SmithKline Beecham for a Superior Service
Level or a Superior Internal Service Level that is an Additional Service, the
parties shall negotiate an adjustment to the Applicable Fee pursuant to Section
8.01 to reflect such Additional Service.
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ARTICLE VIII
FEES
SECTION 8.01. CATEGORY THREE USES. (a) During the period
beginning on the Effective Date and ending on the date immediately prior to the
Commencement Date, there shall be no charge for Category Three Uses of Data.
Subject to Section 8.01(b), for each twelve-month period during the Initial
Term, commencing on the Commencement Date or the twelve-month anniversary
thereof, and for each Renewal Term, if the Term is so extended by SmithKline
Beecham (each such twelve-month period or Renewal Term, an "APPLICABLE PERIOD"),
SmithKline Beecham shall pay to Quest Diagnostics for Category Three Uses of
Data a fee (the "APPLICABLE FEE") equal to the lowest price charged in the
twelve-month period preceding such Applicable Period by Quest Diagnostics or one
of its Affiliates to an IX Competitor (an "APPLICABLE CLIENT"), for similar use
of laboratory data, PROVIDED that if Quest Diagnostics or its Affiliates do not
provide in the normal course of the Quest Diagnostics Informatics Business
similar use of laboratory data to four or more Applicable Clients, then the
Applicable Fee shall be the lesser of (i) the fair market value of SmithKline
Beecham's use of the Data during such Applicable Period and (ii) the lowest
price that Quest Diagnostics or one of its Affiliates charges or reasonably
would charge an Applicable Client for similar use of laboratory data for such
Applicable Period. The lowest price that Quest Diagnostics or one of its
Affiliates charges or reasonably would charge an Applicable Client for similar
use of laboratory data, as provided in the foregoing sentence, shall be
determined using as a reference the prices Quest Diagnostics and its Affiliates
charge Applicable Clients for separate categories of laboratory data and
separate uses of such data, such as, without limitation, for use of patient
identifiable laboratory data and use of encoded laboratory data for programs,
services and products. The use of Data under this Agreement shall be valued
based on such separate categories of laboratory data used under this Agreement
(including any use via sublicenses). All consideration received or provided by
Quest Diagnostics or its Affiliates in connection with this Agreement, other
than equity in IX Company, and in connection with any other applicable agreement
under which Quest Diagnostics or its Affiliates provide laboratory data to
Applicable Clients shall be taken into account for purposes of this Section
8.01; PROVIDED that Quest Diagnostics' or its Affiliates' receipt of equity
securities of a Applicable Client to which any of them provides laboratory data
shall be excluded from the consideration taken into account under this Section
8.01. For purposes of this Section 8.01, an Applicable Client, together with all
of its Affiliates, shall be treated as a single Client of Quest Diagnostics.
(b) The Applicable Fee determined pursuant to Section 8.01(a)
(before giving effect to this Section 8.01(b)) for Category Three Uses of the
Data during each Applicable Period set forth below shall be reduced by a
percentage discount of the Applicable Fee (before giving effect to this Section
8.01(b)).
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First Applicable Period: 25%
Second Applicable Period: 25%
Third Applicable Period: 15%
Fourth Applicable Period: 10%
(c) SmithKline Beecham and Quest Diagnostics, acting
reasonably and in good faith, shall seek to reach an agreement on the Applicable
Fee to apply for each Applicable Period not later than 90 days prior to the
start of such Applicable Period. If they reach agreement, such Applicable Fee
shall be binding on the parties for the entire Applicable Period, subject to any
adjustment in the Applicable Fee pursuant to Section 7.05. If they cannot timely
reach agreement on such Applicable Fee, then the Applicable Fee for the
twelve-month period of the Term immediately preceding the start of the
Applicable Period in dispute shall apply, pending resolution pursuant to Section
12.15. Payments of the Applicable Fee, whether final or pending resolution,
shall be made annually, in advance, on the first day of each Applicable Period.
Promptly and in any event within 30 days of the resolution of the Applicable Fee
to apply for such Applicable Period in dispute, either (i) Quest Diagnostics
shall refund to SmithKline Beecham any overpayment by it of the Applicable Fee
or (ii) SmithKline Beecham shall pay any remaining balance due of the Applicable
Fee to Quest Diagnostics, plus, in the case of each of the foregoing clauses (i)
and (ii), interest on the amount of such refund or balance due at the prime rate
published by Citibank, N.A. on the last business day of each month(s) during the
period from the beginning of such Applicable Period and the date on which the
amount of the refund or additional balance due, as the case may be, is paid.
(d) (i) In connection with the determination of the Applicable
Fee pursuant to Section 8.01(a), during the Term Quest Diagnostics
shall provide SmithKline Beecham, subject to Section 12.03, with the
relevant terms of each other agreement entered into during the Term
pursuant to which Quest Diagnostics or its Affiliates provide another
Applicable Client use of laboratory data (or encoded laboratory data)
(an "OTHER QUEST DATA ACCESS AGREEMENT"). Quest Diagnostics may exclude
the name of such Applicable Client, project specific data and anything
that could reasonably identify the Applicable Client or the project,
but shall include a brief description of its use of the laboratory data
and/or encoded laboratory data.
(ii) In connection with the determination of the Applicable
Fee pursuant to Section 8.01(b), during the Term, SmithKline Beecham
shall provide Quest Diagnostics, subject to Section 12.03, with the
terms related to its anticipated use of the Data and other information
that is reasonably necessary in order to determine the Applicable Fee
for each Applicable Period. SmithKline Beecham may exclude the names of
any of its Clients, project specific data and anything that could
reasonably identify its Clients or its projects, including any drug or
vaccine involved.
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(e) If SmithKline Beecham and Quest Diagnostics have not
reached an agreement on the Applicable Fee to apply pursuant to Section 8.01(a)
for an Applicable Period on or prior to 90th day prior to the start of such
Renewal Term, then such dispute shall be resolved pursuant to Section 12.15. If
the dispute is arbitrated pursuant to Section 5 of Appendix D, the arbitrator
shall request that each party present the arbitrator with a proposed Applicable
Fee, which can be based on a fixed amount, volume of use, a royalty rate or any
other reasonable method or combination of methods. The arbitrator shall then
select that party's proposal that most closely approximates the Applicable Fee
due pursuant to Section 8.01(a), before giving effect to Section 8.01(b). The
arbitrator shall not select any other amount as the Applicable Fee unless the
arbitrator determines that either party has not complied with Section 8.01(d).
In selecting which proposal most closely approximates the Applicable Fee, the
arbitrator shall consider, in addition to the other considerations set forth in
Section 8.01, (i) for purposes of determining the fair market value of
SmithKline Beecham's use of the Data during such Applicable Period, any evidence
provided by the parties of the fair market value of SmithKline Beecham's use of
the Data, (ii) for purposes of determining the lowest price that Quest
Diagnostics charges or reasonably would charge an Applicable Client for similar
use of laboratory data for such Applicable Period, the Other Quest Data Access
Agreements provided to the arbitrator by the parties and (iii) such other
information as the arbitrator shall deem relevant. In comparing the terms of
this Agreement with the terms of other data access agreements, the arbitrator
shall compare the type and scope of use of laboratory data, the volume of use of
laboratory data, the type of customer, the term of the applicable data access
agreement, when such agreement was entered into and any other factors the
arbitrator deems relevant.
SECTION 8.02. CURRENCY AND PAYMENT. All amounts due by
SmithKline Beecham to Quest Diagnostics under any provision of this Agreement
shall be payable in United States currency by electronic funds transfer (SWIFT)
to an account designated by Quest Diagnostics. Any obligation to pay shall only
be deemed fulfilled on the day on which the relevant amount of money is credited
to the aforesaid account. The fees specified in this Article VIII shall be
denominated in U.S. dollars. Quest Diagnostics shall be responsible on its own
account for its own corporate income taxes. In the event of a breach by Quest
Diagnostics that continues for thirty (30) days after SmithKline Beecham gives
Quest Diagnostics written notice setting forth the nature of such breach,
SmithKline Beecham may suspend payment of any amount due under Section 8.01
until Quest Diagnostics cures such breach.
SECTION 8.03. INTEREST. If SmithKline Beecham shall fail to
pay any amount specified under this Agreement after the due date thereof, the
amount owed shall bear interest at the prime rate published by Citibank, N.A. on
the last business day of the month(s) of the delay plus two (2) percentage
points, from the due date until paid; PROVIDED, HOWEVER, that, if this interest
rate is held to be unenforceable for any reason, the interest rate shall be the
maximum rate allowed by law at the time the payment is due.
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SECTION 8.04. RECORDS. (a) SmithKline Beecham shall keep (and
ensure that its Affiliates shall keep) correct and complete records of account
containing all information required to compute and verify fees due to Quest
Diagnostics under this Agreement, to verify SmithKline Beecham's overall
compliance with the terms of this Agreement and to verify Authorization.
(b) Quest Diagnostics shall keep (and ensure that its
Affiliates shall keep) correct and complete records of account containing all
information required to verify Quest Diagnostics' overall compliance with the
terms of this Agreement.
SECTION 8.05. AUDIT BY SMITHKLINE BEECHAM. SmithKline Beecham
shall be entitled during the Term to retain an independent Third Party (which
shall execute a confidentiality agreement consistent with Section 12.03
reasonably acceptable to Quest Diagnostics) to audit, no more than once per year
at SmithKline Beecham's expense, to verify the compliance of any pricing scheme
proposed by Quest Diagnostics with the standards defined in this Article VIII
and Quest Diagnostics' compliance with the other terms of this Agreement. The
auditor is subject to approval by Quest Diagnostics, which approval shall not be
unreasonably withheld or delayed. The auditor shall be enabled to inspect only
those records reasonably relevant to Quest Diagnostics' compliance with the
terms of this Agreement. The auditor shall conduct its review during Quest
Diagnostics' normal business hours and without unreasonably interfering with
Quest Diagnostics' normal operations. All information obtained by such auditor
shall be considered confidential and subject to Section 12.03 of this Agreement.
Such auditor shall provide to SmithKline Beecham only that information
reasonably required by SmithKline Beecham in order to verify Quest Diagnostics'
compliance with the terms of this Agreement and shall not provide any
information that would identify a Client of Quest Diagnostics or can be excluded
under Section 8.01(d). The auditor shall simultaneously provide to Quest
Diagnostics copies of all information collected from Quest Diagnostics.
SmithKline Beecham shall not under any circumstances disclose any information so
provided by such auditor to any Third Party, except as permitted by Section
12.03.
SECTION 8.06. AUDIT BY QUEST DIAGNOSTICS. Quest Diagnostics
shall be entitled during the Term to retain an independent Third Party (which
shall execute a confidentiality agreement consistent with Section 12.03
reasonably acceptable to SmithKline Beecham) to audit, no more than once per
year at Quest Diagnostics' expense, to verify SmithKline Beecham's compliance
with the terms of this Agreement. The auditor is subject to approval by
SmithKline Beecham, which approval shall not be unreasonably withheld or
delayed. The auditor shall be enabled to inspect only those records reasonably
relevant to SmithKline Beecham's compliance with the terms of this Agreement.
The auditor shall conduct its review during SmithKline Beecham's normal business
hours and without unreasonably interfering with SmithKline Beecham's normal
operations. All information obtained by such auditor shall be considered
confidential and subject to Section 12.03 of this Agreement. Such auditor shall
provide to Quest
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Diagnostics only that information reasonably required by Quest Diagnostics in
order to verify SmithKline Beecham's compliance with the terms of this Agreement
and shall not provide any information that would identify a Client of SmithKline
Beecham or can be excluded under Section 8.01(d). The auditor shall
simultaneously provide to SmithKline Beecham copies of all information collected
from SmithKline Beecham. Quest Diagnostics shall not under any circumstances
disclose any information so provided by such auditor to any Third Party, except
as permitted by Section 12.03.
ARTICLE IX
TERM AND TERMINATION
SECTION 9.01. INITIAL TERM. Unless renewed or otherwise
terminated, this Agreement shall terminate upon the expiration of the Initial
Term.
SECTION 9.02. RENEWAL. Unless this Agreement is otherwise
terminated, SmithKline Beecham shall have the option to renew this Agreement for
up to seven (7) successive one-year renewal terms (each such renewal term, a
"RENEWAL TERM"). SmithKline Beecham agrees to notify Quest Diagnostics in
writing of its intent to renew at least ninety (90) days prior to expiration of
the Initial Term. Subject to Section 9.04, if no Renewal Term is elected by
SmithKline Beecham prior to expiration of the Initial Term or current Renewal
Term, then this Agreement shall expire upon expiration of the Initial Term, or
the Renewal Term, as applicable, and, except as expressly provided otherwise,
all rights and obligations of the parties under this Agreement, including the
right to renew this Agreement, shall terminate.
SECTION 9.03. TERMINATION. Either party may terminate this
Agreement:
(a) If at any time the other party shall file in any court or
agency, pursuant to any statute or regulation of any state or country, a
petition in bankruptcy or insolvency or for reorganization or for an arrangement
or for the appointment of a receiver or trustee of such other party or of its
assets, or if the other party proposes a written agreement of composition or
extension of its debts, or if the other party shall be served with an
involuntary petition against it, filed in any insolvency proceeding, and such
petition shall not be dismissed with sixty (60) days
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after the filing thereof, or if the other party shall propose or be a party to
any dissolution or liquidation, or if the other party shall make an assignment
for the benefit of creditors.
(b) In the event of a breach by the other party upon the
giving of thirty (30) days' written notice setting forth the nature of such
breach. However, if such breach is cured within the thirty (30) day period (or a
longer period where the nature of the breach is such that it is not curable
within thirty (30) days but actions to cure such breach within a reasonable
period of time have promptly been initiated and continue to be diligently
pursued, meeting reasonable milestones to cure), then such notice shall be
deemed to be withdrawn. Any dispute regarding this Section 9.03 shall be
resolved pursuant to Section 12.15.
(c) In the event of a material breach of the provisions of the
Participation Agreement by the other party, upon the giving of 60 days' written
notice setting forth the nature of such breach. However, if such breach is cured
within the 60-day period (or a longer period where the nature of the breach is
such that it is not curable within 60 days but actions to cure such breach
within a reasonable period of time have promptly been initiated and continue to
be diligently pursued, meeting reasonable milestones to cure), then such notice
shall be deemed to be withdrawn.
(d) In the event the Closing (as defined in the Participation
Agreement) does not occur on or before the one-year anniversary of the Effective
Date, upon such party giving written notice to the other party.
(e) In the event that SmithKline Beecham or an Affiliate of
SmithKline Beecham (other than IX Company or a subsidiary of IX Company)
consolidates, merges or combines with, conveys, sells, transfers or leases all
or substantially all its assets to, or enters into another type of business
combination with IX Company or a subsidiary of IX Company, upon the giving of
written notice to the other party.
SECTION 9.04. POST-TERM OBLIGATIONS. (a) Following the Term,
Quest Diagnostics agrees to continue to provide Data, as applicable, to
SmithKline Beecham otherwise in accordance the terms of this Agreement for up to
12 months following such expiration for the sole purpose of allowing SmithKline
Beecham to continue providing existing programs or services to Third Parties to
the extent SmithKline Beecham's contractual obligations as of the expiration of
the Term to provide such programs or services extend past the expiration of this
Agreement; PROVIDED, HOWEVER, that Quest Diagnostics has no such obligation in
the event Quest Diagnostics terminates this Agreement pursuant to Section 9.03.
Fees for providing such continued use of Data will be determined in accordance
with Article VIII as if such Data is being provided during a Renewal Term.
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(b) Upon termination of this Agreement, both parties shall
have the right to retain any sums already paid by the other party hereunder, and
each party shall pay all sums accrued hereunder which are then due.
(c) Upon termination of this Agreement, SmithKline Beecham,
its Affiliates and its sublicensees shall have the non-exclusive, perpetual,
royalty-free, worldwide right and license to use Data previously received by
them under Article III and/or Article IV.
(d) Expiration or termination of this Agreement in accordance
with the provisions hereof shall not limit remedies which may be otherwise
available in law or equity.
(e) Upon expiration or termination of this Agreement, this
Agreement shall be of no further force or effect, except for (i) any obligations
or liabilities of either party then accrued and unpaid or not performed and (ii)
Articles V and XI, and Sections 3.01, 4.01, 4.03, 12.03, 12.07, 12.15, 12.16,
12.17 and this Section 9.04 shall survive such expiration or termination.
Notwithstanding the foregoing, during the twelve-month period contemplated by
Section 9.04(a), the terms of this Agreement shall remain in effect except as
contemplated by this Section 9.04.
SECTION 9.05. SUSPENSION. If (a) SmithKline Beecham, its
Affiliates, the Information Encoder or any Person who obtained Data, directly or
indirectly, from SmithKline Beecham or any of its Affiliates has breached any
obligations contained in this Agreement related to patient confidentiality or
(b) a civil violation with respect to patient confidentiality attributable to
SmithKline Beecham, its Affiliates, the Information Encoder or any Person who
obtained Data, directly or indirectly, from SmithKline Beecham or any of its
Affiliates has occurred under this Agreement or (c) Quest Diagnostics reasonably
believes as a result of a change in Applicable Law or a new judicial or
administrative interpretation of existing Applicable Law binding on Quest
Diagnostics that a criminal violation with respect to patient confidentiality
attributable to SmithKline Beecham, its Affiliates, the Information Encoder or
any Person who obtained Data, directly or indirectly, from SmithKline Beecham or
any of its Affiliates has occurred under this Agreement (provided that (i) Quest
Diagnostics provides SmithKline Beecham with written notice of its determination
as promptly as reasonably practicable and (ii) Quest Diagnostics provides
SmithKline Beecham with a written opinion of counsel, reasonably qualified to
opine on the law of patient confidentiality, disclosures and use of healthcare
data, supporting Quest Diagnostics' contention), then in addition to its other
rights Quest Diagnostics, upon written notice to SmithKline Beecham has the
right to immediately suspend the transmission of Patient Identifiers, Patient
Demographic Information and physician identification numbers to the Information
Encoder and the providing of Data to SmithKline Beecham solely to the extent
necessary to prevent the continuation of such breach or violation and only until
such time as (i) SmithKline Beecham puts in place a remedy reasonably acceptable
to Quest Diagnostics or (ii) Quest Diagnostics and SmithKline Beecham, each
acting reasonably and in good faith, agree that no such breach or violation or
change in Applicable Law has occurred. If, within 5 business days, SmithKline
Beecham and Quest Diagnostics cannot
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agree on the appropriate remedy or on whether or not such alleged breach or
violation has occurred, the parties shall resolve such dispute pursuant to
Section 12.15. If Quest Diagnostics suspends the provision of Data pursuant to
the foregoing clause (c), SmithKline Beecham shall not be obligated to pay the
fees provided in Section 8.01 for such suspended Data during the period of such
suspension.
ARTICLE X
ASSIGNMENT
SECTION 10.01. ASSIGNMENT. (a) SmithKline Beecham may not
assign this Agreement in whole or in part, except upon the occurrence of the
Closing (as defined in the Participation Agreement); provided however,
SmithKline Beecham may assign this Agreement in whole and not in part to IX
Company and SmithKline Beecham shall be released from all of its obligations
hereunder arising after such assignment.
(b) So long as SmithKline Beecham, directly or indirectly,
beneficially owns an equity interest in IX Company of 38.5% or greater, IX
Company shall not sublicense to SmithKline Beecham or any Affiliate of
SmithKline Beecham (other than subsidiaries of IX Company) any right to use Data
under this Agreement; PROVIDED that (A) SmithKline Beecham may use the Data for
research and other use within SmithKline Beecham and (B) IX Company may
sublicense the Data to SmithKline Beecham or one of its Affiliates for any use
permitted under this Agreement if IX Company and SmithKline Beecham agree in
writing that SmithKline Beecham will pass through to IX Company all of the net
profits of SmithKline Beecham's use of the Data (PROVIDED that SmithKline
Beecham shall be entitled to reimbursement of its reasonable out-of-pocket costs
and expenses related to such use).
(c) This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by IX Company to SmithKline Beecham or
an Affiliate of SmithKline Beecham (other than subsidiaries of IX Company or any
Affiliate of IX Company that is not an Affiliate of SmithKline Beecham) without
the prior written consent of the other party hereto.
(d) For purposes of this Section 10.01, SmithKline Beecham and
its Affiliates (other than IX Company and its subsidiaries) shall be deemed to
not be Affiliates of IX Company and its subsidiaries.
(e) This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by IX Company or by Quest Diagnostics
(other than by operation of law in connection with a merger, or sale of
substantially all the assets, of IX Company or Quest Diagnostics) without the
prior written consent of the other party hereto; PROVIDED, HOWEVER, that
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either party may assign its rights hereunder in whole and not in part to its
Affiliate without the prior written consent of the other party; PROVIDED
FURTHER, HOWEVER, that no assignment shall limit or affect the assignor's
obligations hereunder. In the event that any such assignee ceases to be an
Affiliate of the assignor, all rights and obligations hereunder shall revert to
the assignor. Any attempted assignment in violation of this Section 10.01 shall
be void.
ARTICLE XI
INDEMNIFICATION
SECTION 11.01. INDEMNIFICATION BY SMITHKLINE BEECHAM. Quest
Diagnostics, its Affiliates and their successors and permitted assigns, and the
officers, directors, employees and agents of Quest Diagnostics, its Affiliates
and their successors and permitted assigns, in accordance with Section 10.01
(each a "QUEST DIAGNOSTICS INDEMNIFIED PARTY"), shall be indemnified and held
harmless by SmithKline Beecham 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 Quest Diagnostics 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:
(a) the breach by SmithKline Beecham or any of its Affiliates
of any of the terms of this Agreement;
(b) the use or disclosure, by SmithKline Beecham or any of its
Affiliates, of any Data, whether or not in accordance with the terms of this
Agreement, but not the disclosure of Encoded Laboratory Data to SmithKline
Beecham or any of its Affiliates by Quest Diagnostics pursuant to this Agreement
(unless such disclosure is prohibited by the terms of an agreement entered into
by SBCL or its Affiliates prior to the Effective Date);
(c) the use or disclosure by any Third Party of any Data,
whether or not in accordance with the terms of this Agreement, when such Data
was obtained, directly or indirectly, from SmithKline Beecham or any of its
Affiliates, but not the disclosure of Encoded Laboratory Data to SmithKline
Beecham or any of its Affiliates by Quest Diagnostics pursuant to this
Agreement; or
(d) any disclosure by the Information Encoder to any Person
(other than Quest Diagnostics) of any portion of the Master Encoding Key
Database in violation of Applicable Law or the terms of this Agreement;
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PROVIDED that SmithKline Beecham shall not indemnify and hold harmless any Quest
Diagnostics Indemnified Party for any Loss to the extent arising out of or
resulting from such Quest Diagnostics Indemnified Party's negligence or wilful
misconduct, Quest Diagnostics' breach of this Agreement or from any inaccuracy
in the Data excluding Data in the SBCL Informatics Database in the form such
Data and the SBCL Informatics Database existed on the Effective Date; PROVIDED
further that the provision of Data by Quest Diagnostics under this Agreement
shall not be deemed to be negligence. Nothing herein shall be deemed to
supersede SmithKline Beecham's indemnification obligation under the Purchase
Agreement with respect to testing performed by SBCL prior to the Effective Date.
To the extent that a Quest Diagnostics Indemnified Party is
entitled under the terms of the applicable Authorization to indemnification or
to otherwise recover damages from a Client of Quest Diagnostics for any Losses
incurred by the Quest Diagnostics Indemnified Party for which SmithKline Beecham
also has an indemnification obligation under this Section 11.01 and such Client
is not the subject of an involuntary case or proceeding under federal or state
bankruptcy, insolvency, reorganization or other similar law, (i) the Quest
Diagnostics Indemnified Party shall seek, using commercially reasonable efforts,
to recover the full amount of such Losses from such Client before making any
claim against SmithKline Beecham under this Section 11.01 and (ii) SmithKline
Beecham shall be obligated to indemnify the Quest Diagnostics Indemnified Party
pursuant to this Section 11.01 for such Losses solely to the extent that such
Losses exceed the amount of indemnification or other damages recovered by the
Quest Diagnostics Indemnified Party from such Client, PROVIDED that the Quest
Diagnostics Indemnified Party has complied with its obligations under the
foregoing clause (i). For purposes of this Section 11.01, "commercially
reasonable efforts" shall include pursuing a claim for indemnification or to
otherwise recover damages from a Client of Quest Diagnostics until the matter is
finally determined by a court of competent jurisdiction, unless SmithKline
Beecham otherwise gives the Quest Diagnostics Indemnified Party its written
consent (which shall not be unreasonably withheld).
To the extent any obligation of SmithKline Beecham in this
Section 11.01 may be unenforceable, SmithKline Beecham 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 Quest Diagnostics
Indemnified Parties for which SmithKline Beecham has an indemnification
obligation under this Section 11.01.
SECTION 11.02. INDEMNIFICATION BY QUEST DIAGNOSTICS.
SmithKline Beecham, its Affiliates and their successors and permitted assigns,
and the officers, directors, employees and agents of SmithKline Beecham, its
Affiliates and their successors and permitted assigns, in accordance with
Section 10.01 (each a "SMITHKLINE BEECHAM INDEMNIFIED PARTY"), shall be
indemnified and held harmless by Quest Diagnostics for any and all Losses to the
extent arising out of or resulting from (i) the breach by Quest Diagnostics or
any of its Affiliates of any of the terms of this Agreement or (ii) any
inaccuracy in the Data excluding (A) Data in the SBCL
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Informatics Database in the form such data and the SBCL Informatics Database
existed on the Effective Date and (B) Data transferred without error (to the
extent such error relates to the Loss) to the SBCL Informatics Database after
the Effective Date solely to the extent such Data relates to testing performed
by SBCL on or prior to the Effective Date. To the extent any obligation of Quest
Diagnostics in this Section 11.02 may be unenforceable, Quest Diagnostics 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
SmithKline Beecham Indemnified Parties for which Quest Diagnostics has an
indemnification obligation under this Section 11.02.
SECTION 11.03. CERTAIN PROCEDURES. (a) A Quest Diagnostics
Indemnified Party or SmithKline Beecham 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 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 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 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 this Article XI, such claim specified by the Indemnified
Party in such notice shall be conclusively deemed a liability of the
indemnifying party under this 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 12.16.
(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
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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 in a case where the indemnifying party
shall not have assumed the defense of such Third Party Claim 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 11.04. ADJUSTMENTS; LIMITATIONS ON INDEMNITY. (a) Any
amount indemnified against under this Article XI 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
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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 11.04 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. The parties
shall make any adjusting payment between each other as is required under this
Section 11.04 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) SmithKline Beecham shall not have any liability under this
Article XI or in connection with its breach of any other provision of this
Agreement for any consequential, punitive, indirect, special or incidental
damages incurred by any Quest Diagnostics Indemnified Party other than
consequential, punitive, indirect, special or incidental damages actually paid
to any third party by such Quest Diagnostics Indemnified Party.
(c) Quest Diagnostics shall not have any liability under this
Article XI or in connection with its breach of any other provision of this
Agreement for any consequential, punitive, indirect, special or incidental
damages incurred by any SmithKline Beecham Indemnified Party other than
consequential, punitive, indirect, special or incidental damages actually paid
to any third party by such SmithKline Beecham Indemnified Party.
ARTICLE XII
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MISCELLANEOUS
SECTION 12.01. INTERPRETATION. (a) The headings contained in
this Agreement, in any Appendix hereto, and in the table of contents to this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All Appendices annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Appendix 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". 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 and Appendices shall be construed to refer to Articles,
Sections and Appendices of this Agreement.
(d) All references in this Agreement to Laboratory Data,
Encoded Laboratory Data and Data expressly exclude (i) Laboratory Data used by
SmithKline Beecham and/or its Affiliates pursuant to the Category One Data
Access Agreement dated the date hereof, between SmithKline Beecham and Quest
Diagnostics and (ii) any other Laboratory Data not used by SmithKline Beecham
and/or its Affiliates pursuant to this Agreement.
SECTION 12.02. 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.
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SECTION 12.03. CONFIDENTIALITY. (a) During the Term of this
Agreement and for five (5) years thereafter, SmithKline Beecham and Quest
Diagnostics shall not, and shall ensure that their respective Affiliates do not,
use or disclose to Third Parties any confidential information received from the
other (disclosing) party, except as otherwise expressly permitted by this
Agreement, without first obtaining the written consent of the disclosing party.
This confidentiality obligation shall not apply to such information which is or
becomes a matter of public knowledge through no fault of the receiving party or
its Affiliates, or is in the rightful possession of the receiving party as of or
following the Effective Date, or is disclosed to the receiving party by a Third
Party having the right to do so, or is subsequently and independently developed
by employees of the receiving party or Affiliates thereof who had no knowledge
of the confidential information disclosed, or is required by law to be disclosed
(PROVIDED that to the extent feasible, the disclosing party is provided
reasonable advance notice of such disclosure and provided with an effective
opportunity to appear, protest, and seek to limit such disclosure). The parties
shall take all reasonable measures to assure that no unauthorized use or
disclosure is made to Third Parties by Affiliates to whom access to such
information is granted.
(b) Nothing herein shall be construed as preventing SmithKline
Beecham from disclosing any information received from Quest Diagnostics
hereunder to an Affiliate; PROVIDED that such Affiliate has undertaken a similar
written obligation of confidentiality to SmithKline Beecham with respect to the
confidential information. Nothing herein shall be construed as preventing Quest
Diagnostics from disclosing any information received from SmithKline Beecham
hereunder to an Affiliate; PROVIDED that such Affiliate has undertaken a similar
written obligation of confidentiality to Quest Diagnostics with respect to the
confidential information.
(c) SmithKline Beecham covenants for itself and its Affiliates
that they shall not use Data or any subportions thereof in any manner that
discloses or utilizes Patient Identifiers, in any way that violates any
Applicable Laws governing confidentiality of patient identifiable healthcare
information.
(d) Each party shall keep confidential, and shall cause its
Affiliates, officers, directors and employees to keep confidential and shall use
commercially reasonable efforts to cause its advisors to keep confidential, (i)
the existence of any notice delivered by a party hereto to another party hereto
in accordance with this Agreement and (ii) the content of any such notice,
except as required by Applicable Law and except for information which is
available to the public, or thereafter becomes available to the public other
than as a result of a breach of this Section 12.03(d). In the event disclosure
is required under Applicable Law, each party shall, and shall cause its
applicable Affiliate, officer, director or employee to, provide the other party
with prompt prior written notice of such requirement so that such party may seek
a protective order or other appropriate remedy, and otherwise cooperate in all
commercially reasonable respects in obtaining the same.
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(e) Nothing in this Section 12.03 shall enlarge or diminish
any right or obligations undertaken by either party in any other provision of
this Agreement. To the extent that the general restrictions of this Section
12.03 conflict in any respect with any other specific provision of this
Agreement, that specific provision shall control.
SECTION 12.04. AMENDMENTS AND WAIVER OF PERFORMANCE. (a) No
amendment, modification or waiver in respect of this Agreement shall be
effective unless it (i) shall be in writing making specific reference to this
Agreement and setting forth the plan or intention to amend, modify or waive this
Agreement; and (ii) shall be signed by the parties hereto.
(b) The failure of either party at any time or times to
require performance of any provision hereof shall in no manner affect its rights
at a later time to enforce the same. No waiver by either party of any condition
or term in any one or more instances shall be construed as a further or
continuing waiver of such condition or term or of another condition or term.
SECTION 12.05. 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, other than the parties hereto and such assigns, any legal or equitable
rights hereunder.
SECTION 12.06. NOTICES. All notices or other communications
required or permitted to be given hereunder, except as provided in Sections
6.02(b) and 7.02(b), 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:
(a) if to Quest Diagnostics:
Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, NJ 07608
Attention: General Counsel
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(b) if to SmithKline Beecham,
SmithKline Beecham plc
One New Horizons Court
Middlesex TW8 9EP
Brentford, England
Attention: General Counsel
with copies to:
SmithKline Beecham Corporation
One Franklin Plaza
Philadelphia, PA 19102
Attention: U.S. General Counsel
SECTION 12.07. TRADEMARKS AND TRADE NAMES. (a) SmithKline
Beecham shall not be permitted to use the trademarks or trade names of Quest
Diagnostics in connection with the use of Data or the distribution, marketing or
sale of programs or services which use Data without prior written approval of
Quest Diagnostics for each such use; PROVIDED that SmithKline Beecham shall be
permitted to properly identify Quest Diagnostics as the source of Data provided
that such identification is merely of Quest Diagnostics as the source of such
Data and is made in accordance with Quest Diagnostics' then current policy for
identifying itself (as provided in writing to SmithKline Beecham).
(b) So long as this Agreement is in effect, SmithKline Beecham
shall, upon Quest Diagnostics' written request, accompany all Data delivered or
published via the Internet with Quest Diagnostics' then-current corporate logo.
Pursuant to guidelines to be established by SmithKline Beecham in good faith,
such logo shall be displayed, together with such Data and with comparable
prominence regarding location, presentation and relative size as any other
provider of data used by SmithKline Beecham in programs, services and products
under Category Three Uses (taking into account the relative importance and
quantities of the various categories and sources of data included in the
program, service or product and the relative terms and conditions on which such
categories and sources of data are provided); PROVIDED that so long as Quest
Diagnostics is the largest supplier of laboratory data (in terms of volume of
data supplied) to SmithKline Beecham, Quest Diagnostics' then-current corporate
logo shall be displayed together with such Data and with superior location (i.e.
first in order), and otherwise with not less favorable prominence regarding
presentation and relative size, as compared with any other provider of
laboratory data to SmithKline Beecham.
SECTION 12.08. CHANGE IN APPLICABLE LAW. In the event of a
change in or addition to any Applicable Law which has, or could reasonably be
expected to have, a material
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effect upon the access to or use of Data as provided in this Agreement, then
either party may give the other party notice of the need for the parties to
bring this Agreement into compliance with such revised Applicable Law. Unless
waived by the receiving party, the notifying party shall support its contention
of the need to amend this Agreement due to the contended change in Applicable
Law with a written legal opinion to such effect from outside counsel reasonably
qualified to opine on the law of patient confidentiality, disclosures and use of
health care data and reasonably acceptable to the receiving party. If the
parties agree that the change in or addition to Applicable Law has occurred and
that the Agreement must be brought into compliance with such change or addition,
the parties shall then negotiate reasonably and in good faith to amend this
Agreement solely to the extent necessary to bring the terms of this Agreement
into such compliance while preserving to the extent possible the original intent
of, and all the rights and relative benefits of each party under, this
Agreement. If, within five business days, the parties can not mutually agree on
whether or not a modification to the Agreement is required pursuant to this
Section 12.08 or on the terms of such modification to this Agreement as
contemplated by the immediately preceding sentence, such matter shall be
resolved pursuant to Section 12.15.
SECTION 12.09. DISENROLLMENT. SmithKline Beecham agrees (a) to
promptly notify Quest Diagnostics of any complaints by a Person concerning such
Person's inclusion in any product or service provided by SmithKline Beecham or
SmithKline Beecham's Affiliate pursuant to this Agreement and (b) to cooperate
with Quest Diagnostics in resolving such complaints in a commercially reasonable
manner, including without limitation promptly disenrolling any Person who so
requests. SmithKline Beecham shall promptly disenroll from inclusion in any
product or service provided by SmithKline Beecham or SmithKline Beecham's
Affiliate pursuant to this Agreement any Person who so requests.
SECTION 12.10. 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 12.10; PROVIDED that receipt of copies of such
counterparts is confirmed.
SECTION 12.11. ENTIRE AGREEMENT. This Agreement and the
Participation Agreement contains the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject matter including,
without limitation, the Purchase Agreement and its Exhibits (including the
"Summary of Terms - Data Access Agreement"). 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.
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SECTION 12.12. 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 12.13. FORCE MAJEURE. If the performance of any part
of this Agreement by either party, or of any obligation under this Agreement, is
prevented, restricted, interfered with or delayed by reason of any cause beyond
the reasonable control of the party obligated to perform (including any computer
system or connectivity failures), unless conclusive evidence to the contrary is
provided, the party so affected shall, upon giving written notice to the other
party, be excused from such performance to the extent of such prevention,
restriction, interference or delay, PROVIDED that the affected party shall use
reasonable commercial efforts to avoid or remove such causes of non-performance
and shall promptly continue performance at such time when such causes are
removed. When such circumstances arise, the parties shall negotiate in good
faith what, if any, modification of the terms of this Agreement may be required
in order to arrive at an equitable solution.
SECTION 12.14. RECORDING. Either party may, at any time,
record, register or otherwise notify this Agreement in appropriate governmental
or regulatory offices anywhere in the world, and the other party shall provide
reasonable assistance to such party at such party's expense in effecting such
recording, registering or notifying.
SECTION 12.15. DISPUTE RESOLUTION. (a) All controversies,
claims or disputes ("Disputes") that arise out of or relate to Articles VI, VII
and VIII, Sections 4.03, 5.02, 9.03, 9.05 and 12.08 and any other provision of
this Agreement which expressly provides that this Section 12.15 applies to such
provision shall be resolved in accordance with the provisions of Appendix D.
(b) Either party may elect to cause any Dispute that arises
out of or relates to Sections 4.03, 5.02, 9.03, 9.05, 12.08, or otherwise arises
out of or relates to a change in Applicable Law relating to patent
confidentiality or the suspension by Quest Diagnostics of the transmission of
Data to SmithKline Beecham to be resolved pursuant to Sections 3 and 6 of
Appendix D.
(c) The costs and expenses of an arbitration pursuant to
Section 6 of Appendix D of any Dispute that arises out of or relates to Section
7.05(c) or 8.01(b), and the related costs and expenses of each of the parties,
shall be borne by the "Losing" party unless the arbitrator or arbitrators
determine that another allocation of such costs and expenses is equitable.
38
<PAGE>
SECTION 12.16. CONSENT TO JURISDICTION. Both SmithKline
Beecham and Quest Diagnostics irrevocably submit 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 or any
transaction contemplated hereby. Both SmithKline Beecham and Quest Diagnostics
agree 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. Both SmithKline Beecham and Quest Diagnostics
further agree that service of any process, summons, notice or document by U.S.
registered mail to each 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
12.16. Both SmithKline Beecham and Quest Diagnostics irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby 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 waive and agree 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 12.17. WAIVER OF JURY TRIAL. Subject to their
obligations under Section 12.15, each of SmithKline Beecham and Quest
Diagnostics 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 or any
transaction contemplated hereby. Both SmithKline Beecham and Quest Diagnostics
(a) certify 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) acknowledge
that each of them and the other parties hereto have been induced to enter into
this Agreement by, among other things, the mutual waivers and certifications in
this Section 12.17.
SECTION 12.18. EQUITABLE RELIEF. (a) Quest Diagnostics
acknowledges that access to Laboratory Data and Encoded Laboratory Data for
SmithKline Beecham is a unique resource for which breach by Quest Diagnostics
could cause SmithKline Beecham immediate and irreparable harm and may entitle
SmithKline Beecham to preliminary, and permanent injunctive relief and other
equitable relief to remedy such breach or the threat of such a breach without
the necessity of proving actual damages.
39
<PAGE>
(b) SmithKline Beecham acknowledges SmithKline Beecham's
breach of the terms of this Agreement and the unauthorized disclosure of Data as
to which it has access under this Agreement could cause Quest Diagnostics
immediate and irreparable harm and under such circumstances may entitle Quest
Diagnostics to preliminary, and permanent injunctive relief and other equitable
relief to remedy such breach or the threat of such a breach without the
necessity of proving actual damages.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
SMITHKLINE BEECHAM PLC,
By /s/ Donald F. Parman
Name: Donald F. Parman
Title: Authorized Signatory
QUEST DIAGNOSTICS
INCORPORATED,
By /s/ Kenneth W. Freeman
Name: Kenneth W. Freeman
Title: Chief Executive Officer
<PAGE>
Exhibit 9
PARTICIPATION AGREEMENT dated August 16, 1999
(hereinafter, this "AGREEMENT"), between SMITHKLINE
BEECHAM plc, a public limited company organized under
the laws of England ("SB"), and QUEST DIAGNOSTICS
INCORPORATED, a Delaware corporation ("QUEST").
WHEREAS, SB, SmithKline Beecham Corporation, a Pennsylvania
corporation and wholly owned subsidiary of SB, and Quest have entered into a
Stock and Asset Purchase Agreement, dated as of February 9, 1999 and amended as
of the date hereof (the "STOCK AND ASSET PURCHASE AGREEMENT"), pursuant to which
SB has agreed to sell, and Quest has agreed to purchase, SB's clinical
laboratories business, including 100% of the outstanding capital stock of SBCL,
Inc., a Delaware corporation, and certain other assets, as further described
therein.
WHEREAS, SB and Quest have entered into the Category Three
Data Access Agreement dated as of the date hereof (the "DATA ACCESS AGREEMENT").
WHEREAS, SB intends to form a company ("IX COMPANY") that may,
among other activities, use the laboratory data to be received from Quest
pursuant to the Data Access Agreement, together with other health care related
data, to develop, market and sell products and services under Category Three
Uses (as such term is defined in the Data Access Agreement).
WHEREAS, SB wishes to cause IX Company to grant Quest an
initial 29.5% nonvoting equity interest in IX Company on the terms and subject
to the conditions of this Agreement.
WHEREAS, Quest wishes to accept the initial 29.5% nonvoting
equity interest in IX Company on the terms and subject to the conditions of this
Agreement, to become a significant investor in IX Company and to work with SB
and IX Company to further IX Company's interests.
<PAGE>
2
NOW, THEREFORE, for the consideration and the agreements and
covenants set forth in the Data Access Agreement and the mutual agreements and
covenants set forth below, SB and Quest hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01. DEFINITIONS. (a) For purposes of this agreement,
the following terms used herein have the following meanings:
"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.
"APPLICABLE LAW" means, with respect to any jurisdiction, all
applicable statutes, laws, ordinances, rules, orders and regulations (to the
extent then in force and effect) of 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, having authority over an applicable Person in such jurisdiction.
"APPLICABLE PERIOD" means the period that begins on the
Formation Date and ends on the earlier of (i) the date that is the 10-year
anniversary of the Formation Date and (ii) the date on which the Quest Members
beneficially own Units representing an aggregate Percentage Interest of less
than 10%; PROVIDED that the Applicable Period shall be reinstated if at any time
prior to the 10-year anniversary of the Formation Date the Quest Members
beneficially own Units representing an aggregate Percentage Interest of 10% or
more; PROVIDED FURTHER that in no event shall the Applicable Period continue
past the date that is the 10-year anniversary of the Formation Date.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which banks are required or authorized by law to be closed in the
City of New York.
"COMMISSION" means the Securities and Exchange Commission.
"COMPETITIVE LABORATORY COMPANY" means any Person that
derives, directly or indirectly through its Affiliates, more than $500,000,000
in gross revenues in any fiscal year (determined in accordance with GAAP) from
clinical laboratory, anatomic pathology or other diagnostics testing services
(including, without limitation, routine and esoteric clinical laboratory
services (including genetics testing), clinical laboratory
<PAGE>
3
services involved with clinical trials, point-of-care testing, clinical
laboratory services involving corporate healthcare and services involved with
managing hospital laboratories) including the reports of test results, but
excluding any gross revenues derived from providing, in any manner, directly or
indirectly, data or information products or services which substantially consist
of laboratory data (other than initial reporting of laboratory test results).
"GAAP" means generally accepted accounting principles in the
United States.
"GOVERNMENTAL ENTITY" means 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.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"MEMBER" means any Person who holds Units.
"PERCENTAGE INTEREST" means, with respect to any Person at a
specified time, such Person's proportionate equity ownership interest in all
issued and outstanding Units of IX Company, expressed as a percentage, as
represented by the Units held by such Person at such time and excluding any
Preference Securities held by such Person.
"PERSON" means any individual, firm, corporation, partnership,
limited partnership, limited liability company, trust, joint venture, government
entity or other entity.
"PHARMACEUTICAL BUSINESS" means the discovery, development,
manufacture, marketing or distribution of pharmaceutical or vaccine products.
"PHARMACEUTICAL COMPANY" means a Person that derives, directly
or indirectly from its Affiliates, more than $500,000,000 in gross revenues in
any fiscal year (determined in accordance with GAAP) from one or more
Pharmaceutical Businesses.
"QUEST DIRECTOR" means a Director designated by Quest pursuant
to Section 4.02.
"QUEST MEMBER" means Quest if it is a Member and any Affiliate
of Quest that is a Member.
"SECURITIES ACT" means the Securities Act of 1933 and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"THIRD PARTY" means any Person other than SB, Quest, IX
Company or any of their respective Affiliates.
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4
(b) The following terms have the meanings set forth in the
Sections set forth below:
Term Location
- ---- --------
Additional Preference Securities.................................... 2.05(b)
Additional Quest Preference Securities.............................. 2.05(b)
Additional Quest Securities......................................... 2.05(b)
Additional Quest Units.............................................. 2.05(a)
Additional Securities............................................... 2.05(b)
Additional Units.................................................... 2.05(a)
Agreement........................................................... Preamble
Board............................................................... 4.01(a)
Closing............................................................. 2.08(a)
Closing Date........................................................ 2.08(a)
Constitutive Documents.............................................. 2.03(a)
Data Access Agreement............................................... Preamble
Data Access Agreement Assignment.................................... 2.08(b)
Directors........................................................... 4.01(a)
DOJ................................................................. 2.06
Dragalong Member.................................................... 5.04
Formation Date...................................................... 2.02(a)
FTC................................................................. 2.06
Funding Loans....................................................... 3.03
Indemnified Person.................................................. 7.14(a)
IPO Date............................................................ 2.04(d)
IX Company.......................................................... Preamble
IX Company Joinder.................................................. 2.07
Measurement Date.................................................... 2.05(c)
New Investor........................................................ 2.05(a)
Nonvoting Units..................................................... 2.04(d)
Offer Notice........................................................ 2.05(a)
Offered Amount...................................................... 5.05
Offeror............................................................. 5.02(a)
Preference Securities............................................... 2.04(g)
Preference Security Purchase Right.................................. 2.05(b)
Purchase Agreement.................................................. 5.04
Purchase Rights..................................................... 2.05(b)
Purchaser........................................................... 5.04
Qualifying Third Party Investment................................... 3.02(c)
Quest............................................................... Preamble
Quest Interest...................................................... 2.02(b)
Registration Rights................................................. 5.08
Representatives..................................................... 7.12(a)
<PAGE>
5
SB.................................................................. Preamble
Stock and Asset Purchase Agreement.................................. Preamble
Tagalong Member..................................................... 5.05
Tagalong Offer...................................................... 5.05
Transfer............................................................ 5.01
Transfer Notice..................................................... 5.02(a)
Transfer Offer...................................................... 5.02(a)
Transfer Securities................................................. 5.02(a)
Unit Purchase Right................................................. 2.05(a)
Units............................................................... 2.04(a)
Voting Units........................................................ 2.04(c)
ARTICLE II
FORMATION OF IX COMPANY AND GRANT OF QUEST INTEREST
SECTION 2.01. FORMATION OF IX COMPANY. Subject to the terms
and conditions of this Agreement, SB hereby agrees to cause IX Company to be
formed on or prior to the Closing Date (as defined below). SB currently
contemplates causing IX Company to be formed as a limited liability company
under Delaware law; provided that SB may cause IX Company to be formed as any
type of entity that SB deems appropriate, including a corporation, limited
partnership, limited liability partnership or limited liability company, and in
any jurisdiction which SB deems appropriate. If SB believes that it would be
advantageous to do so, and not disadvantageous to IX Company (for this purpose,
the two entities taken as a whole), it may elect to form two entities to conduct
IX Company's business, one organized in the United States and the other
organized offshore. SB and Quest each would be granted interests in both
entities identical to their respective interests provided for in Section 2.02
and this Agreement would apply equally to both entities.
SECTION 2.02. GRANT OF SB AND QUEST INTERESTS. (a) On the date
on which IX Company is formed pursuant to Section 2.01 (the "FORMATION DATE")
and in consideration for the capital contributions to be made by SB and its
Affiliates pursuant to Section 3.01, SB and/or any Affiliates designated by SB
collectively shall be issued by IX Company Voting Units representing a 100%
Percentage Interest in IX Company as of the Formation Date and before giving
effect to the grant of the Quest Interest (as defined below) on the Closing Date
pursuant to Section 2.02(b).
(b) Subject to the terms and conditions of this Agreement and
without any consideration from Quest other than the consideration and the
agreements and covenants set forth in the Data Access Agreement and the
agreements and covenants set forth in this Agreement, SB hereby agrees to cause
IX Company on the Closing Date to grant to Quest, or any Affiliate of Quest
designated by Quest in writing at least 10 Business Days in advance of the
Closing Date, Nonvoting Units (as defined below) in IX Company
<PAGE>
6
representing an initial 29.5% Percentage Interest (such Nonvoting Units,
together with any other Units or Preference Securities acquired by Quest or an
Affiliate of Quest during the Applicable Period, the "QUEST INTEREST") and Quest
hereby agrees to cause the Quest Members to accept such Nonvoting Units and to
assume as of the Closing Date all the customary obligations of a Member of IX
Company to the same extent SB accepts such customary obligations in its capacity
as a Member of IX Company; PROVIDED that, subject to Section 7.14, the Quest
Members shall have customary limited liability for IX Company's obligations and
shall have no obligation to make capital contributions to IX Company.
(c) Notwithstanding Quest's beneficial ownership of the Quest
Interest, each of Quest and its Affiliates may sell or license laboratory data
or information products or services to any Person Quest or any one of its
Affiliates chooses and invest in any Person that uses or distributes laboratory
data of Quest or any other Person.
SECTION 2.03. CONSTITUTIVE DOCUMENTS. (a) The organizational
and other constitutive documents of IX Company (the "CONSTITUTIVE DOCUMENTS")
shall be in the form determined by the holders of a majority of the voting power
represented by the Voting Units, in their sole discretion, and may be amended
from time to time in the manner provided in the applicable Constitutive
Documents, PROVIDED that, without Quest's written consent, the Constitutive
Documents, as amended from time to time, shall not, at the time of their
adoption or such amendment, diminish any rights granted to Quest hereunder or be
reasonably anticipated to result in the diminishment of any of the material
rights granted to Quest hereunder. Quest agrees to execute and deliver
counterparts to the Constitutive Documents on the Closing Date.
(b) IX Company shall in a timely manner provide to Quest
copies of the Constitutive Documents and each amendment thereto.
(c) So long as the Constitutive Documents comply (and after
any amendments thereto, shall comply) with Section 2.03(a), Quest promptly shall
provide IX Company, upon written request from IX Company, with any approvals of
the Constitutive Documents, including of any amendments thereto, as from time to
time shall be required under the terms of the Constitutive Documents and
Applicable Law.
<PAGE>
7
SECTION 2.04. CAPITALIZATION. Prior to the IPO Date (as
defined below), the Constitutive Documents shall provide, consistent with the
type of entity in which IX Company is then organized and Applicable Law, that:
(a) subject to all the rights, powers and preferences of
holders of the Preference Securities provided for in Section 2.04(g),
IX Company's common equity shall be divided into units ("UNITS") each
of which shall entitle its holder (i) to an equal pro rata share in the
profits and distributions (in cash, securities or property) of IX
Company that IX Company, in its sole discretion, may determine to
distribute to holders of Units; PROVIDED that no distributions shall be
made on any class or series of Units unless such distribution is made
on all classes and series of Units; and (ii) upon IX Company's
voluntary or involuntary liquidation, dissolution or winding up, to an
equal pro rata share in the net assets of IX Company available for
distribution to the holders of Units;
(b) subject to Section 2.04(a), the Units shall be divided
into two or more classes, with the Units comprising each class (i)
entitling all the holders of such Units to such voting powers and
governance and other rights (including rights, if any, to convert into
another class of Units) and (ii) being subject to such qualifications,
limitations, obligations and restrictions, as determined by IX Company,
in its sole discretion, at the time IX Company establishes and
designates such class;
(c) on the Formation Date, IX Company shall have established
and designated at least one class of Units ("VOTING UNITS") which Units
shall entitle their holders (i) to vote generally for the election of
Directors (as defined below), other than any Director which another
class or classes of Units or Preference Securities is entitled to
designate, and (ii) to vote generally on all other matters relating to
IX Company requiring the action of IX Company's Members;
(d) on the Formation Date, IX Company shall have established
and designated at least one class of Units ("NONVOTING UNITS") which
Units shall not entitle their holders to any voting rights, including
any right to vote generally for the election of Directors or to vote
generally on any other matters relating to IX Company, except for such
matters on which holders of Units of such class are entitled to vote as
a matter of Applicable Law; each Nonvoting Unit shall be automatically
converted into one Voting Unit immediately prior to the date on which
IX Company effects an initial public offering of Voting Units
registered under the Securities Act (the "IPO DATE");
(e) IX Company at any time (i) may establish and designate one
or more additional classes of Units consistent with this Section 2.04
and (ii) subject to Section 4.03(b), may issue Units of such class or
classes, as well as Voting Units and Nonvoting Units, in such
quantities and at such times as IX Company shall determine in its sole
discretion;
<PAGE>
8
(f) the holders of Units shall not have any preemptive rights
to subscribe for any Units of any class whether now or hereafter
authorized, established or designated; and
(g) IX Company at any time (i) may establish and designate one
or more classes of securities having such powers, preferences and
relative rights and any qualifications, limitations, obligations and
restrictions as IX Company may determine in its sole discretion
("PREFERENCE SECURITIES") and (ii) subject to Section 4.03(b), may
issue Preference Securities in such quantities and at such times as IX
Company shall determine in its sole discretion.
SECTION 2.05. QUEST PURCHASE RIGHTS. (a) Subject to the terms
and conditions of this Agreement but notwithstanding Section 2.04(f), IX Company
will not issue Units of any class ("ADDITIONAL UNITS") at any time prior to the
IPO Date (including pursuant to Section 3.02) to any Person other than Quest or
one of its Affiliates (a "NEW INVESTOR") unless it first offers Quest in writing
(an "OFFER NOTICE") the right to also purchase, for a purchase price determined
in accordance with Sections 2.05(c), (d) and (e), up to that number of
additional Nonvoting Units ("ADDITIONAL QUEST UNITS") so that the Percentage
Interest of the Quest Members immediately after giving effect to the proposed
issuance of the Additional Units and all of the offered Additional Quest Units
will be equal to the Percentage Interest of the Quest Members immediately prior
to giving effect to the proposed issuances of the Additional Units and all of
the offered Additional Quest Units (the "UNIT PURCHASE RIGHT"). Quest's right to
purchase any of the Additional Quest Units shall be subject to the consummation
of IX Company's issuance of the Additional Units to the New Investor.
(b) Subject to the terms and conditions of this Agreement but
notwithstanding Section 2.04(f), IX Company will not issue Preference Securities
of any class ("ADDITIONAL PREFERENCE SECURITIES" and, together with Additional
Units, "ADDITIONAL SECURITIES") at any time prior to the IPO Date (including
pursuant to Section 3.02) to a New Investor unless it first delivers to Quest an
Offer Notice describing Quest's right to also purchase, for a purchase price
determined in accordance with Sections 2.05(c), (d) and (e), up to that number
of additional Preference Securities of such class ("ADDITIONAL QUEST PREFERENCE
SECURITIES" and, together with Additional Quest Units, "ADDITIONAL QUEST
SECURITIES") equal to the product of (i) the aggregate Percentage Interests of
the Quest Members as of such time and (ii) the quotient of (A) the number of
Additional Preference Securities proposed to be issued divided by (B) the
aggregate Percentage Interests as of such time of all the Members other than the
Quest Members (the "PREFERENCE SECURITY PURCHASE RIGHT"; the Unit Purchase Right
and the Preference Security Purchase Right are referred to herein collectively
as the "PURCHASE RIGHTS"). Quest's right to purchase any of the Additional Quest
Preference Securities shall be subject to IX Company's issuance of the
applicable Additional Preference Securities to the New Investor.
<PAGE>
9
(c) For each Additional Quest Security (or fraction thereof)
that Quest purchases pursuant to Section 2.05(a) or (b), Quest shall pay a cash
purchase price (in U.S. dollars) per each such security equivalent to the
economic value paid (in cash or other consideration) per each applicable
Additional Security purchased by the New Investor. Equivalent economic value for
purposes of this Section 2.05(c) shall be measured as of the date on which the
sale of the applicable Additional Securities is consummated unless IX Company
and the New Investor enter into a binding written agreement with respect to the
sale of such Additional Securities, in which case equivalent economic value
shall be measured as of the date of such agreement (subject to any adjustment
provided in such agreement) (such date on which equivalent economic value is
measured, the "MEASUREMENT DATE").
(d) Noncash consideration paid by a New Investor for
Additional Securities shall be valued for purposes of Section 2.05(c) at its
fair market value as mutually agreed in good faith by Quest and IX Company, or,
if Quest and IX Company cannot agree on such value within five Business Days of
the Measurement Date, by a mutually agreed internationally recognized investment
banking firm. Quest and IX Company shall cause any such valuation to be made as
promptly as reasonably possible and in any event not later than 20 Business Days
from the Measurement Date and shall share equally the fees and expenses of such
investment banking firm.
(e) Quest shall not be entitled in connection with its
purchase of Additional Quest Securities to the benefit of any non-economic terms
related to IX Company's sale of Additional Securities, including additional
voting or governance rights, or to require the modification of any of the terms
and conditions of the Data Access Agreement.
(f) Not less than three Business Days prior to the Measurement
Date with respect to a proposed issuance of Additional Securities, IX Company
shall provide Quest, subject to Section 7.12, with an Offer Notice setting forth
(i) the name of the applicable New Investor, (ii) the number and class or series
of such Additional Securities that IX Company proposes to issue, (iii) the
proposed purchase price for each such Additional Security, or if the
consideration is non-cash, the estimated value of such consideration per each
such Additional Security, (iv) the form of the consideration to be paid by the
New Investor for such Additional Securities and (v) the other terms and
conditions of the New Investor's proposed purchase of such Additional
Securities. IX Company also shall provide Quest, subject to Section 7.12, with
any information provided by IX Company to the New Investor in connection with
the New Investor's proposed investment in such Additional Securities at
substantially the same time such information is given to the New Investor.
(g) Quest shall have ten Business Days from the date on which
it receives an Offer Notice to elect to exercise its applicable Purchase Right
to purchase all or a portion of the Additional Quest Securities offered to it
pursuant to Section 2.05(a) or (b); PROVIDED that if Quest properly elects to
exercise its Purchase Right and the economic
<PAGE>
10
consideration to be received by IX Company from the New Investor in return for
the Additional Securities is more favorable to IX Company, without regard to
appreciation or depreciation of the value of the specified consideration, than
the economic consideration described in the applicable Offer Notice, IX Company
promptly shall provide Quest with written notice of such revised economic
consideration and Quest shall have five Business Days from the date on which it
receives such written notice in which to rescind its election to exercise its
Purchase Right. If Quest does not elect to exercise its Purchase Right or, if it
rescinds its election to exercise its Purchase Right pursuant to the preceding
sentence, IX Company shall have 30 days in which (i) to issue the Additional
Securities or (ii) to enter into a binding written agreement with the New
Investor, subject to customary closing conditions, to issue the Additional
Securities to the New Investor; PROVIDED that the economic consideration to be
received by IX Company for such Additional Securities shall not be meaningfully
(i.e., 5% or more) less favorable to IX Company, without regard to appreciation
or depreciation of the value of the specified consideration, than the economic
consideration described in the Offer Notice or revised notice, as applicable. If
IX Company does not issue the Additional Securities or enter into a binding
written agreement to do so within such 30-day period, IX Company shall no longer
be permitted to issue such Additional Securities without again fully complying
with this Section 2.05.
(h) The closing of any purchase by Quest of Additional Quest
Securities shall occur concurrently with the issuance of the applicable
Additional Securities if reasonably practicable or otherwise within five
Business Days after the later of (1) the date of the issuance of such Additional
Securities and (2) delivery of notice by Quest electing to exercise its Purchase
Right, PROVIDED that if Quest and IX Company have not agreed on the value of any
noncash consideration paid by a New Investor for Additional Securities prior to
such time for closing, the closing shall be postponed until the fifth Business
Day after the date on which such value is determined pursuant to Section
2.05(d).
(i) This Section 2.05 shall terminate and be deemed deleted
from this Agreement on the earlier of (i) the IPO Date and (ii) the date on
which Quest Members beneficially own Units representing an aggregate Percentage
Interest of less than 5%.
SECTION 2.06. HSR. Each of SB and Quest 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 by Sections 2.01, 2.02 and 3.01 and any supplemental information
requested in connection therewith pursuant to the HSR Act. Each of SB and Quest
shall furnish to the other such necessary information and reasonable assistance
as the other may request in connection with the preparation of any filing or
submission that is necessary under the HSR Act. SB and Quest shall keep each
other appraised of the status of any communications with, and any inquiries or
requests for additional information from, the FTC and DOJ and shall comply
promptly
<PAGE>
11
with any such inquiry or request. Each of SB and Quest shall use its reasonable
best efforts to obtain any clearance required under the HSR Act for consummation
of the transactions contemplated by Sections 2.01, 2.02 and 3.01.
SECTION 2.07. RATIFICATION BY IX COMPANY. SB shall cause IX
Company to deliver to Quest at Closing a joinder (the "IX COMPANY JOINDER")
pursuant to which IX Company accepts and agrees to the terms and conditions of
this Agreement, assumes IX Company's obligations hereunder and agrees to become
a party hereto.
SECTION 2.08. CLOSING. (a) Subject to the terms and conditions
of this Agreement, the transactions contemplated by Section 2.02(b) of this
Agreement shall take place at a closing (the "CLOSING") to be held at the
offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New
York, New York 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, if any, and (ii) satisfaction or waiver of
all other conditions to the obligations of the parties set forth in Section
2.08(b), or at such other place or at such other time or on such other date as
SB and Quest may mutually agree upon in writing (the day on which the Closing
takes place being the "CLOSING DATE").
(b) (i) The obligation of Quest to consummate the transactions
contemplated by Section 2.02(b) of this Agreement is subject to the satisfaction
of the following conditions:
(A) The representations and warranties of SB 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 expressly relate to an earlier date (in
which case such representations and warranties shall be true and
correct in all material respects on and as of such earlier date). SB
shall have complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with
by SB by the time of the Closing. SB shall have delivered to Quest a
certificate dated as of the Closing Date and signed by an officer of SB
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 transactions contemplated by Sections 2.01, 2.02 or 3.01 of this
Agreement shall be in effect.
(C) The waiting period under the HSR Act, if any, applicable
to the transactions contemplated by Sections 2.01, 2.02 or 3.01 of this
Agreement shall have expired or been terminated.
<PAGE>
12
(D) IX Company shall have provided written evidence to Quest
that IX Company has granted to Quest the Quest Interest.
(E) SB shall have caused IX Company to execute and deliver to
Quest the IX Company Joinder.
(F) Each of SB and IX Company shall have executed and
delivered to the other, with a copy to Quest, an assignment and
assumption agreement (the "DATA ACCESS AGREEMENT ASSIGNMENT") pursuant
to which SB shall have assigned its rights and obligations under the
Data Access Agreement to IX Company and IX Company shall have assumed
such rights and obligations in a manner consistent in all material
respects with Section 10.01(a) of the Data Access Agreement.
(ii) The obligation of SB to consummate the transactions
contemplated by Sections 2.01, 2.02 and 3.01 of this Agreement is subject to the
satisfaction of the following conditions:
(A) The representations and warranties of Quest 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 expressly relate to an earlier date (in
which case such representations and warranties shall be true and
correct in all material respects on and as of such earlier date). Quest
shall have complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with
by Quest by the time of the Closing. Quest shall have delivered to SB a
certificate dated as of the Closing Date and signed by an officer of
Quest 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 transactions contemplated by Sections 2.01, 2.02 and 3.01 of this
Agreement shall be in effect.
(C) The waiting period under the HSR Act, if any, applicable
to the transactions contemplated by Sections 2.01, 2.02 and 3.01 of
this Agreement shall have expired or been terminated.
(D) Quest shall have delivered to SB and IX Company an
executed counterpart to the Constitutive Documents.
(E) Quest shall have executed and delivered to SB and IX
Company a written acknowledgment and agreement to the Data Access
Agreement Assignment, including a release of SB from any obligations
under the Data
<PAGE>
13
Access Agreement consistent in all material respects with Section
10.01(a) of the Data Access Agreement.
(c) On the terms and subject to the conditions of this
Agreement, each party shall use its reasonable best efforts to cause the Closing
to occur as soon as reasonably practicable, including taking all reasonable
actions necessary to comply promptly with all legal requirements that may be
imposed on it or any of its Affiliates with respect to the Closing. Without
limiting the foregoing or the provisions set forth in Section 2.06, SB and Quest
shall use their respective reasonable best efforts to cause the Closing to occur
on or prior to February 15, 2000.
(d) Either party may terminate this Agreement if the Closing
has not occurred on or before August 15, 2000.
ARTICLE III
CAPITAL CONTRIBUTIONS AND FUNDING
SECTION 3.01. INITIAL CONTRIBUTION OF ASSETS. (a) Within 60
days following the Closing Date, SB shall cause to be contributed to IX Company
the assets described in Annex A, subject to the liabilities described in Annex
A.
(b) Contributions made prior to the one-year anniversary of
the date hereof by SB and its Affiliates to IX Company of property other than
cash, which property is owned by SB or an Affiliate of SB as of the date hereof,
shall be deemed to have been made by SB and its Affiliates in consideration for
the Voting Units to be issued to or on behalf of SB pursuant to Section 2.02(a),
and SB and its Affiliates shall not be entitled to any additional consideration
for such contributions.
(c) Contributions pursuant to this Section 3.01 (i) in the
aggregate shall not reduce IX Company's net worth and (ii) shall not result in
IX Company assuming any indebtedness for money borrowed or intercompany payables
due to SB.
SECTION 3.02. ADDITIONAL CAPITAL CONTRIBUTIONS. (a) Subject to
Section 3.02(b), IX Company may from time to time request that one or more of
its Members make capital contributions to IX Company in consideration for the
issuance to such Members of additional Units and/or Preference Securities;
PROVIDED that, except as otherwise expressly provided in this Article III,
neither SB, Quest nor any of their Affiliates shall be obligated to make any
capital contributions to IX Company or to otherwise fund the operations of IX
Company. Subject to Sections 2.05 and 3.02(b), any capital contributions made to
IX Company by a Member shall be made on such terms and conditions as IX Company
and such Member shall agree in their sole discretion.
<PAGE>
14
(b) Except as otherwise expressly provided in this Article
III, so long as IX Company is an Affiliate of SB, neither SB nor its Affiliates
shall make additional capital contributions to IX Company prior to the IPO Date,
nor shall IX Company issue Units and/or Preference Securities to SB or any of
its Affiliates (other than pursuant to a pro rata distribution in kind of Units
and/or Preference Securities to IX Company's Members) prior to the IPO Date.
(c) Notwithstanding Section 3.02(b), at any time prior to the
IPO Date when a Third Party is purchasing Units and/or Preference Securities of
IX Company in exchange for cash or noncash consideration having a value of
$25,000,000 or more (a "QUALIFYING THIRD PARTY INVESTMENT") and including during
the 30-day period after the date of a Qualifying Third Party Investment,
(i) IX Company may issue Units and/or Preference Securities to
SB and/or its Affiliates and SB and/or its Affiliates may purchase such
Units and/or Preference Securities; and
(ii) SB shall have the option to convert all or a portion of
the then outstanding Funding Loans (as defined below), and any accrued
and unpaid interest thereon, into Voting Units and/or Preference
Securities;
PROVIDED that such purchase shall be of the same class and series as the
Preference Securities purchased by the Third Party or if the Third Party
purchased Units, or Voting Units, and the purchase price paid (in cash or other
consideration, including by the conversion of Funding Loans and any accrued and
unpaid interest thereon) by SB and/or any of its Affiliates for any such Units
and/or Preference Securities shall have an economic value per Unit or Preference
Security equivalent to the economic value per Unit or Preference Security paid
(in cash or other consideration) by such Third Party for the Units and/or
Preference Securities that the Third Party purchases in such Qualifying Third
Party Investment. Equivalent economic value for purposes of this Section 3.02(c)
shall be measured as of the date such Qualifying Third Party Investment is
consummated.
(d) Notwithstanding Section 3.02(b), on or immediately prior
to the IPO Date,
(i) IX Company may issue Units to SB and/or its Affiliates and
SB and/or its Affiliates may purchase such Units; and
(ii) SB shall have the option to convert all or a portion of
the then outstanding Funding Loans, and any accrued and unpaid interest
thereon, into Voting Units;
PROVIDED that the purchase price paid (in cash or other consideration, including
by the conversion of Funding Loans and any accrued and unpaid interest thereon)
by SB and/or any of its Affiliates for any such Units shall have an economic
value per Unit equivalent to the initial public offering price per Unit (less
any underwriting discounts paid by
<PAGE>
15
IX Company) received by IX Company in the initial public offering of its Units.
Equivalent economic value for purposes of this Section 3.02(d) shall be measured
as of the IPO Date.
(e) Notwithstanding Section 3.02(b) but subject to Section
3.01(b), during the Applicable Period IX Company may issue Units and/or
Preference Securities to SB and/or its Affiliates and SB and/or its Affiliates
may purchase such Units and/or Preference Securities in consideration for the
contribution to IX Company of property and other noncash consideration, PROVIDED
that such consideration is valued as of the date of its contribution in
accordance with Section 3.02(f) and that such Units and/or Preference Securities
are valued as of the same date in accordance with Section 3.02(g).
(f) Noncash consideration paid by SB or its Affiliates or by a
Third Party for Units and/or Preference Securities shall be valued for purposes
of this Section 3.02 at the fair market value of such consideration as mutually
agreed in good faith by SB and the holders (other than SB and its Affiliates) of
a majority of the voting power represented by the Voting Units and Nonvoting
Units (assuming for this purpose that each Nonvoting Unit is entitled to one
vote) or, if SB and such holders are in disagreement on or after the fifth
Business Day following the date IX Company requests in writing the valuation of
such consideration, by an internationally recognized investment banking firm
mutually agreed in good faith by SB and such holders. SB, Quest and IX Company
shall use commercially reasonable efforts to cause any such valuation to be made
as promptly as possible. IX Company shall pay all fees and expenses of such
investment banking firm. The non-economic terms of a Person's investment in IX
Company, including such Person's rights with respect to the management and
governance of IX Company, shall not be taken into consideration in the valuation
of the economic consideration paid by such Person for Units and/or Preference
Securities for purposes of this Section 3.02.
(g) Units and Preference Securities to be issued to SB or its
Affiliates for noncash consideration shall be valued at their fair market value
as mutually agreed in good faith by SB and the holders (other than SB and its
Affiliates) of a majority of the voting power represented by the Voting Units
and Nonvoting Units (assuming for this purpose that each Nonvoting Unit is
entitled to one vote) or, if SB and such holders are in disagreement on or after
the fifth Business Day following the date IX Company requests in writing the
valuation of such Units and/or Preference Securities, by an internationally
recognized investment banking firm mutually agreed in good faith by SB and such
holders. SB, Quest and IX Company shall use commercially reasonable efforts to
cause any such valuation to be made as promptly as possible. IX Company shall
pay all fees and expenses of such investment banking firm.
SECTION 3.03. FUNDING OF IX COMPANY. SB in its sole discretion
may choose (but shall not have any obligation) to fund, directly or indirectly
through an Affiliate of SB, the operations of IX Company. Prior to the earlier
of (i) the date on which SB ceases to be an Affiliate of IX Company and (ii) the
IPO Date, such funding
<PAGE>
16
initially shall be in the form of loans ("FUNDING LOANS") providing for interest
not to exceed the annual rate of interest quoted from time to time by Citibank
N.A. as its prime rate in New York, plus two percent per annum. Funding Loans
shall be repayable upon demand, together with all accrued and unpaid interest
thereon; PROVIDED that SB may not demand repayment of any Funding Loan prior to
the IPO Date.
ARTICLE IV
MANAGEMENT OF IX COMPANY
SECTION 4.01. MANAGEMENT OF IX COMPANY. (a) IX Company shall
be managed on behalf of the holders of equity interests in IX Company by a board
of directors (the "BOARD") comprised of such number of members ("DIRECTORS") as
the holders of a majority of the voting power represented by the Voting Units
shall determine in accordance with the Constitutive Documents and Applicable
Law. Subject to Section 4.02, the Directors shall be designated by the holders
of a majority of the voting power represented by the Voting Units in the manner
set forth in the Constitutive Documents.
(b) Notwithstanding the foregoing Section 4.01(a), IX Company
may grant other Members in IX Company (other than a Competitive Laboratory
Company) such governance rights as IX Company shall determine in its sole
discretion.
(c) The Board, in its sole discretion, from time to time (i)
may appoint officers, who may be (but shall not be required to be) employees of
IX Company, any Member or any Affiliate of a Member, to manage the operations of
IX Company on a day-to-day basis subject to the supervision of the Board or (ii)
may contract with any Person to manage IX Company on a day-to-day basis subject
to the supervision of the Board.
SECTION 4.02. QUEST BOARD REPRESENTATION. (a) As soon as
practicable following the Closing Date and in any event within ten Business
Days, IX Company will take such actions as may be necessary to increase the size
of the Board by two Directors to be designated by Quest.
(b) As long as the Quest Members beneficially own, in the
aggregate, Units constituting a Percentage Interest of:
(i) at least 20%, Quest shall be entitled to designate two,
and only two, individuals as Directors,
(ii) at least 10%, but less than 20%, Quest shall be entitled
to designate one, and only one, individual as a Director; and
<PAGE>
17
(iii) at least 5%, but less than 10%, Quest shall be entitled
to designate one, and only one, individual as a Director; PROVIDED that
this clause (iii) shall be terminated and deemed deleted from this
Agreement concurrently with any termination or expiration of the Data
Access Agreement.
(c) Subject to Section 4.02(b), if a Director designated by
Quest ceases to serve as a Director for any reason, the vacancy created by such
Director's ceasing to serve shall be filled by an individual designated by
Quest.
(d) In the event that at any time the number of Directors
designated by Quest pursuant to this Section 4.02 is greater than the number of
Directors that the Quest has the right to designate pursuant to Section 4.02(b),
then that number of Quest Directors shall be deemed to have resigned immediately
upon the occurrence of such event such that the remaining number of Quest
Directors, if any, conform to the provisions of this Agreement, and Quest shall
take all action to promptly effect such resignation.
(e) Any individual designated by Quest pursuant to Section
4.02(b) or (c) shall be reasonably acceptable to IX Company; PROVIDED that in
all events the Chief Executive Officer of Quest shall be deemed reasonably
acceptable.
(f) This Agreement does not create or constitute, and shall
not be construed as creating or constituting, a voting trust agreement under the
Delaware General Corporation Law or any other applicable corporation law.
(g) As long as Quest has the ability to designate a Director
pursuant to Section this 4.02, one such Director shall serve on each committee
of the Board.
(h) If IX Company shall at any time effect an initial public
offering of its Units, SB, Quest and IX Company shall negotiate in good faith to
amend this Section 4.02 to reflect terms and conditions, consistent with Quest's
right to appoint Directors pursuant to Section 4.02(b), customary for a public
company organized as a corporation which in no event shall decrease the number
of directors provided for in Section 4.02(b) or amend the proviso in Section
4.02(e).
SECTION 4.03. NO GOVERNANCE RIGHTS. (a) Except as expressly
provided in this Section 4.03, none of Quest, its Affiliates or its designated
Directors shall have any approval, veto or other governance rights of any kind
or nature whatsoever over any management decision made by SB, the Board, the
other Members or otherwise with respect to IX Company; PROVIDED that the Quest
directors shall have normal voting rights of other directors (which shall
specifically exclude any special approval or veto rights).
(b) IX Company shall be free from any restriction of any kind
or nature whatsoever (but subject to its obligations under Sections 3.02(c), (d)
and (e) and Section 4.04) under this Agreement on its rights to issue Units
and/or Preference
<PAGE>
18
Securities to any Person except as expressly set forth in Sections 2.05 and
3.02(b); PROVIDED that during the Applicable Period IX Company will not, without
Quest's prior written consent, issue Units or Preference Securities to any
Competitive Laboratory Company except (i) in a widely distributed public
offering of such Units and/or Preference Securities or (ii) as permitted
pursuant to Section 4.03(c).
(c) Notwithstanding Section 4.03(b), IX Company shall be free
to issue Nonvoting Units to any Competitive Laboratory Company; PROVIDED that
such Units at the time of their issuance do not represent a Percentage Interest
of more than 5% and such Competitive Laboratory is not given the right to
designate a Director.
(d) IX Company shall be free from any restriction of any kind
or nature whatsoever under this Agreement on its rights to consolidate, merge or
combine with, convey, sell, transfer or lease all or substantially all its
assets to, or enter into any other type of business combination with, any
Person; PROVIDED that the Quest Members shall receive consideration in any such
transaction on a per-Unit basis that is not less than the consideration received
on a per-Unit basis by any other Member of IX Company; PROVIDED FURTHER that
this Section 4.03(d) shall not diminish or otherwise affect Quest's rights under
Section 9.03 of the Data Access Agreement to terminate the Data Access Agreement
under the conditions provided therein.
SECTION 4.04. AFFILIATE TRANSACTIONS. (a) During the period
prior to the date of the first Qualifying Third Party Investment, IX Company
shall not enter into any transaction with SB or an Affiliate of SB unless the
terms and conditions of such transaction are no more favorable to SB or such
Affiliate of SB than if such terms and conditions were negotiated by two
reasonable, independent Third Parties on an arm's-length basis.
(b) So long as SB and its Affiliates have an aggregate
Percentage Interest of 29.5% or more, IX Company shall not consolidate, merge or
combine with, convey, sell, transfer or lease all or substantially all its
assets to, or enter into any other type of business combination with SB or
another Affiliate of SB except (i) with an Affiliate of IX Company controlled
(as such term is defined in the definition of Affiliate) by IX Company or (ii)
in a transaction in which immediately after giving effect to such transaction,
the relative equity ownership interests in the surviving company are
substantially the same as the Percentage Interests of the Members prior to such
transaction.
(c) The parties agree that the rights granted to Quest under
this Agreement have been negotiated on an arms'-length basis and that,
notwithstanding anything to the contrary in this Agreement, any rights granted
by IX Company to SB or its Affiliates that are substantially similar to Sections
2.03, 2.05 (to the extent it does not affect Quest's ability to fully exercise
its rights under Section 2.05), 2.07, 4.02, 4.04, 4.05, 5.07 and 5.08 would not
be more favorable to SB and its Affiliates than if such rights were negotiated
by two reasonable, independent Third Parties on an arms'-length basis. Quest
<PAGE>
19
hereby consents to any future grant by IX Company to SB and its Affiliates of
rights substantially similar to the rights granted to Quest and its Affiliates
hereunder.
SECTION 4.05. REPORTING. So long as the Quest Members hold a
Percentage Interest of at least 5%, IX Company shall provide Quest on a monthly
basis prior to the IPO Date with summary financial information, including
summary monthly financial statements and budgets, to the extent prepared by IX
Company and provided to its senior management and SB.
SECTION 4.06. TAX MATTERS PARTNER. If IX Company is treated as
a partnership for U.S. Federal income tax purposes, SB shall be the "tax matters
partner" within the meaning of Section 6231(a)(7) of the Internal Revenue Code
of 1986, as amended (the "CODE"), and shall act in any similar capacity under
other applicable tax law. All expenses incurred by SB while acting in such
capacity shall be paid or reimbursed by IX Company.
SECTION 4.07. TAX DECISIONS AND ELECTIONS. If IX Company is
treated as a partnership for U.S. Federal income tax purposes, SB shall have the
right to make all decisions with respect to the tax matters and tax returns of
IX Company, including the right to make all tax elections required or permitted
to be made by IX Company under the Code or other applicable tax law.
ARTICLE V
RESTRICTIONS ON TRANSFER; OTHER TRANSFER RIGHTS
SECTION 5.01. RESTRICTIONS ON TRANSFER. Subject to Section
5.07, Quest and its Affiliates will be subject to the following restrictions on
the sale, transfer or other disposition (each, a "TRANSFER") of any Units owned
by Quest or such Affiliates:
(a) during the period from the date hereof through and
including the third anniversary of the date hereof, Quest will not, and
will cause its Affiliates not to, Transfer all or any portion of the
Quest Interest, except to an Affiliate of Quest which agrees in
writing, in form and substance reasonably acceptable to SB, to be bound
by the provisions of this Article V; and
(b) during the Applicable Period, Quest will not, and will
cause its Affiliates not to, Transfer all or any portion of the Quest
Interest to a Pharmaceutical Company, except in connection with a
widely distributed public offering of Units and/or Preference
Securities.
SECTION 5.02. RIGHT OF FIRST REFUSAL. (a) Both parties agree
that, so long as SB and its Affiliates collectively hold a Percentage Interest
of at least 10%, if a Quest Member receives during the Applicable Period a bona
fide offer (a "TRANSFER
<PAGE>
20
OFFER") to purchase for cash any or all of the Units and/or Preference
Securities comprising the Quest Interest and then owned by such Quest Member
from any Person that is not in a Pharmaceutical Company (an "OFFEROR"), which
such Quest Member wishes to accept, Quest shall cause the Transfer Offer to be
reduced to writing and shall provide a written notice (the "TRANSFER NOTICE") of
such Transfer Offer to IX Company and to SB. Quest shall cause the Transfer
Notice to also contain an irrevocable offer from such Quest Member to sell all
or such portion of such Units and/or Preference Securities to SB at a price
equal to the offered price, and upon substantially the same terms and conditions
as those contained in the Transfer Offer and shall be accompanied by a true and
correct copy of the Transfer Offer (which shall identify the Offeror, the amount
of Units and/or Preference Securities to be transferred (the "TRANSFER
SECURITIES"), the price contained in the Transfer Offer and the other terms and
conditions of the Transfer Offer). SB shall have the irrevocable right and
option, within ten Business Days after the date the Transfer Notice is given to
SB, to accept such offer, in the aggregate, as to all, but not less than all, of
the Transfer Securities. If SB desires to exercise such option, SB shall provide
Quest with written notice within such ten-Business Day period.
(b) If at the end of the ten-business day period after the
giving of the Transfer Notice, SB shall not have accepted the offer contained in
such notice as to all the Units and/or Preference Securities covered thereby,
the Quest Member shall have 30 days in which to sell all, but not less than all,
of the Units and/or Preference Securities to the Offeror, at a price equal to
that contained in the Transfer Notice and on terms not more favorable to the
Offeror than were contained in the Transfer Notice. No sale may be made to any
Offeror unless such Offeror agrees in writing, in form and substance acceptable
to SB, to be bound by the provisions of this Article V. Promptly after any sale
pursuant to this Section 5.02, Quest shall notify SB of the consummation thereof
and shall furnish such evidence of the completion (including time of completion)
of such sale and of the terms thereof as SB may request. If at the end of such
30-day period the Quest Member has not completed the sale of all of the Units
and/or Preference Securities, the Quest Member shall no longer be permitted to
sell such securities pursuant to this Section 5.02 without again fully complying
with the provisions of this Section 5.02, and all the restrictions on Transfer
contained in this Agreement shall again be in effect with respect to all of the
Quest Member's Units and/or Preference Securities, including the Transfer Offer.
(c) Quest shall cause each Quest Member to comply with this
Section 5.02.
SECTION 5.03. TRANSFERS OF SB INTEREST. (a) Each of SB and its
Affiliates shall be free from any restriction of any kind or nature whatsoever
under this Agreement on the Transfer by it of any Units and/or Preference
Securities that it may hold at any time (i) except to the extent provided in
Section 5.05 and (ii) except to the extent provided in Section 5.03(b).
<PAGE>
21
(b) Notwithstanding Section 5.03(a), during the Applicable
Period, SB will not, and will cause its Affiliates not to, Transfer any Units
and/or Preference Securities held by them to any Competitive Laboratory Company
except in connection with a widely distributed public offering of the Units
and/or Preference Securities.
SECTION 5.04. DRAGALONG RIGHT. Notwithstanding any provision
to the contrary set forth herein, if at any time during the Applicable Period
(i) SB enters into an agreement (a "PURCHASE AGREEMENT") to sell or otherwise
Transfer all or substantially all of the Units owned by it to any Person other
than an Affiliate of SB (the "PURCHASER"), and (ii) the Purchaser requires as a
condition to completion of such transaction that each Quest Member who is not a
party to the Purchase Agreement (a "DRAGALONG MEMBER") sell the same percentage
of the total number of Units then owned by such Dragalong Member as the
percentage of the total number of Units then owned by SB which is represented by
the total number of Units proposed to be sold or otherwise Transferred by SB
pursuant to the Purchase Agreement, at the same time, at the same price and on
the same terms and conditions as are offered to SB, then in such event each such
Dragalong Member shall at the request of SB, subject to Section 7.12, which
request shall be made in the form of a written notice setting forth (i) the name
and address of the Purchaser, (ii) the proposed purchase price for the Units
proposed to be purchased, (iii) the form of consideration to be paid by the
Purchaser and (iv) the other terms and conditions of the Purchaser's offer,
accept the Purchaser's offer and execute a joinder to the Purchase Agreement
within two Business Days following the date of such request; PROVIDED, HOWEVER,
that a Dragalong Member shall not be obligated to make any representations and
warranties under such Purchase Agreement other than regarding its ownership of
its Units, due organization and authority, absence of conflicts, consents and
compliance with law and shall not have any other obligations that a minority
shareholder selling shares customarily would not have (including non-competition
obligations); PROVIDED, FURTHER, that the liability of a Dragalong Member for
any breach of representation, warranty or covenant under the Purchase Agreement
shall not exceed the consideration to be paid to such Dragalong Member for its
Units sold pursuant to this Section 5.04 without the consent of such Dragalong
Member.
SECTION 5.05. TAGALONG RIGHT. (a) If at any time during the
Applicable Period SB proposes to sell or otherwise Transfer all or substantially
all of its Units to a Purchaser (other than to an Affiliate of SB), SB (i) will
not enter into any Purchase Agreement with any such Purchaser, unless SB causes
the Purchaser to extend to each Quest Member who is not a party to the Purchase
Agreement (a "TAGALONG MEMBER") a written offer to purchase (a "TAGALONG OFFER")
the same percentage of the total number of Units then owned by such Tagalong
Member as the percentage of the total number of Units then owned by SB which is
represented by the total number of Units proposed to be sold or otherwise
Transferred by SB pursuant to the Purchase Agreement (the "OFFERED AMOUNT"), at
the same time, at the same price and on the same terms and conditions as are
offered to SB, and (ii) will not sell any of its Units pursuant to any such
Purchase Agreement unless such Purchaser purchases from each Tagalong Member,
who properly
<PAGE>
22
accepts such Tagalong Offer in the manner provided in Section 5.05(b), the
Offered Amount concurrently with the purchase of the Units of SB.
(b) SB shall cause the Purchaser to give each Tagalong Member
written notice of the Tagalong Offer, which notice shall be subject to Section
7.12 and shall set forth (i) the name and address of the Purchaser, (ii) the
proposed purchase price for the Units proposed to be purchased, (iii) the form
of consideration to be paid by the Purchaser and (iv) the other terms and
conditions of the Tagalong Offer. The Tagalong Offer must be exercised by a
Tagalong Member within ten Business Days following receipt of the notice
required by the preceding sentence by delivery of a written notice to SB and the
Purchaser indicating the Tagalong Member's election to accept the Tagalong
Offer.
SECTION 5.06. FAILURE TO CONSUMMATE A SALE. SB shall not be
liable under any circumstances to the Quest Members if the sale contemplated by
a Purchase Agreement pursuant to Section 5.03 or Section 5.04 is not
consummated, regardless of the reason for the failure of such consummation.
SECTION 5.07. PARTICIPATION IN INITIAL PUBLIC OFFERING. (a) IX
Company shall permit Quest and its Affiliates to participate in an initial
public offering by IX Company of its Units on the same basis as SB and SB's
Affiliate are permitted to participate in such offering, pro rata based on the
relative Percentage Interests on the IPO Date of Quest and its Affiliates on one
hand compared to SB and its Affiliates on the other hand. If SB and its
Affiliates enter into "lockup" agreements with IX Company and/or the
underwriters of IX Company's initial public offering pursuant to which SB and
its Affiliates agree not to Transfer their Units for a period of time following
an initial public offering by IX Company, Quest and its Affiliates shall enter
into "lockup" agreements with IX Company and/or such underwriters on the same
terms and conditions as SB.
(b) If SB proposes to exercise its rights pursuant to Section
3.02(d), or otherwise is offered the opportunity by IX Company, to purchase
Units and/or Preference Securities immediately prior to an initial public
offering by IX Company, Quest shall be permitted to purchase a pro rata (based
on the relative Percentage Interests of Quest and SB as of such date) number of
Units and/or Preference Securities of the same class or series, at the same
time, at the same price and on the same terms and conditions as offered to SB.
SECTION 5.08. REGISTRATION RIGHTS. Concurrently with its
consummation of an initial public offering of its Units, IX Company shall grant
to Quest and its Affiliates and to SB and its Affiliates rights to cause IX
Company to register under the Securities Act resales of any Units held at such
time by such Members ("REGISTRATION RIGHTS"). Such Registration Rights shall not
be less favorable than the Registration Rights that IX Company grants, or shall
have granted, to the other Members of IX Company at or prior to such time.
<PAGE>
23
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF QUEST. Quest
hereby represents and warrants to IX Company and SB and agrees that:
(a) Quest is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Quest has all
requisite corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. All corporate acts and other proceedings required to be taken by Quest
to authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and properly
taken. This Agreement has been duly executed and delivered by Quest and
constitutes a legal, valid and binding obligation of Quest, enforceable against
Quest in accordance with its terms.
(b) (i) Quest will acquire the Quest Interest for its own
account for the purpose of investment and not with a view towards or any present
intention of selling or distributing the Units and (ii) Quest is an Accredited
Investor (as defined in Regulation D under the Securities Act).
(c) Quest understands (i) that the Nonvoting Units comprising
the Quest Interest have not been registered under the Securities Act by reason
of their issuance in a transaction exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof, (ii) that such Units may
not be disposed of unless such disposition is either registered under the
Securities Act or is exempt from registration under that Act and (iii) that IX
Company has no obligation to register such Units except as provided in Sections
5.08.
(d) Quest has such knowledge and experience in financial and
business matters that Quest is capable of evaluating the merits and risks of an
investment in IX Company.
(e) Quest is a "qualified purchaser" as such term is defined
under Section 2(a)(51) of the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
SECTION 6.02. REPRESENTATIONS AND WARRANTIES OF SB. SB hereby
represents and warrants to Quest that:
(a) SB is a public limited company duly organized and validly existing
under the laws of England. SB has all requisite corporate power and authority to
enter into this
<PAGE>
24
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. All corporate acts and other proceedings
required to be taken by SB to authorize the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and properly taken. This Agreement has been duly executed and
delivered by SB and constitutes a legal, valid and binding obligation of SB,
enforceable against SB in accordance with its terms.
(b) On the Formation Date, (i) IX Company shall have no indebtedness
for borrowed money and no intercompany payables owed to SB or its Affiliates and
(ii) the tangible net worth of IX Company (as determined under GAAP) shall be
positive.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. INTERPRETATION. (a) The headings contained in
this Agreement and in the table of contents to this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
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". 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 7.02. 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.
<PAGE>
25
SECTION 7.03. ASSIGNMENT. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable in whole or in
part by Quest, SB or IX Company (other than in whole by operation of law in
connection with a merger, or sale of substantially all the assets, of Quest, SB
or IX Company) without the prior written consent of the other parties hereto;
PROVIDED, HOWEVER, that any party may assign its rights hereunder in whole and
not in part to an Affiliate of such party without the prior written consent of
the other parties; PROVIDE FURTHER, HOWEVER, that no assignment shall limit or
affect the assignor's obligations hereunder. In the event that any such assignee
ceases to be an Affiliate of the assignor, all rights and obligations hereunder
shall revert to the assignor. Any attempted assignment in violation of this
Section 7.03 shall be void. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
permitted assigns of such party.
SECTION 7.04. 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 other than the parties hereto and such assigns, any legal or equitable
rights hereunder.
SECTION 7.05. 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 Quest,
Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, NJ 07608
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Clare O'Brien; and
<PAGE>
26
(ii) if to SB or IX Company,
SmithKline Beecham plc
One New Horizons Court
Middlesex TW8 9EP
Brentford England
Attention: James R. Beery
with copies to:
SmithKline Beecham Corporation
One Franklin Plaza
Philadelphia, PA 19102
Attention: U.S. General Counsel; and
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Susan Webster
SECTION 7.06. 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 7.06; PROVIDED that receipt of copies of such
counterparts is confirmed.
SECTION 7.07. ENTIRE AGREEMENT. This Agreement and the Data
Access 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.
SECTION 7.08. 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 7.09. CONSENT TO JURISDICTION. Each of Quest and SB
irrevocably submits to the exclusive jurisdiction of (a) a Federal Court for the
Southern
<PAGE>
27
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, or any transaction contemplated hereby. Each of Quest and SB
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 Quest and SB 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 7.09. Each of
Quest and SB irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement, or the
transactions contemplated hereby 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 7.10. WAIVER OF JURY TRIAL. Each of Quest and SB
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 or any transaction
contemplated hereby. Each of Quest and SB (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 by, among other things, the
mutual waivers and certifications in this Section 7.10.
SECTION 7.11. 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.
SECTION 7.12. CONFIDENTIALITY. (a) So long as Quest and/or an
Affiliate of Quest is a Member of IX Company, and for five (5) years thereafter,
Quest shall not, shall ensure that its Affiliates, officers, directors,
employees and Quest Directors do not, and shall use commercially reasonable
efforts to cause its agents, advisors and representatives ("REPRESENTATIVES")
not to use or disclose to Third Parties any confidential information relating to
IX Company and its Affiliates received from IX Company, SB or their Affiliates,
without first obtaining the written consent of IX Company. This confidentiality
obligation shall not apply to such information which is or becomes a matter of
public knowledge through no fault of Quest or its Affiliates or Representatives,
or is disclosed to Quest or its Affiliates or Representatives by a Third Party
having the right to do so, or is subsequently and independently developed by
employees of Quest who had no knowledge of the confidential information
disclosed, or is required by
<PAGE>
28
Applicable Law to be disclosed (PROVIDED that to the extent feasible, IX Company
is provided reasonable advance notice of such disclosure and provided with an
effective opportunity to appear, protest, and seek to limit such disclosure).
Quest shall take, and shall ensure that its Affiliates, officers, directors,
employees and Quest Directors take, and shall use commercially reasonable
efforts to cause its Representatives to take, all reasonable measures to assure
that no unauthorized use or disclosure is made to Third Parties of such
information.
(b) Each party shall keep confidential, and shall cause its
Affiliates, officers, directors, employees and Quest Directors to keep
confidential and shall use commercially reasonable efforts to cause its
Representatives to keep confidential, (i) the existence of any notice delivered
by a party hereto to another party hereto in accordance with this Agreement and
(ii) the content of any such notice, except as required by Applicable Law and
except for information which is available to the public, or thereafter becomes
available to the public other than as a result of a breach of this Section
7.12(b). In the event disclosure is required under Applicable Law, each party
shall, and shall cause its applicable Affiliate, officer, director, employee or
Quest Director to, provide the other party with prompt prior written notice of
such requirement so that such party may seek a protective order or other
appropriate remedy, and otherwise cooperate in all commercially reasonable
respects in obtaining the same.
SECTION 7.13. REMEDIES. (a) SB shall not have any liability
under this Agreement in connection with its breach of any provision of this
Agreement for any consequential, punitive, indirect, special or incidental
damages incurred by Quest, IX Company or an Affiliate of Quest or IX Company
other than consequential, punitive, indirect, special or incidental damages
actually paid to any Third Party by Quest, IX Company or an Affiliate of Quest
or IX Company.
(b) IX Company shall not have any liability under this
Agreement in connection with its breach of any provision of this Agreement for
any consequential, punitive, indirect, special or incidental damages incurred by
SB, Quest or any Affiliate of SB or Quest other than consequential, punitive,
indirect, special or incidental damages actually paid to any Third Party by SB,
Quest or any Affiliate of SB or Quest.
(c) Quest shall not have any liability under this Agreement in
connection with its breach of any provision of this Agreement for any
consequential, punitive, indirect, special or incidental damages incurred by SB,
IX Company or any Affiliate of SB or IX Company other than consequential,
punitive, indirect, special or incidental damages actually paid to any Third
Party by SB, IX Company or any Affiliate of SB or IX Company.
(d) A material breach of the provisions of this Agreement by
IX Company or, so long as IX Company is an Affiliate of SB, by SB shall entitle
Quest to terminate the Data Access Agreement upon the giving of 60 days' written
notice setting forth the nature of such breach. However, if such breach is cured
within the 60-day period (or a
<PAGE>
29
longer period where the nature of the breach is such that it is not curable
within 60 days but actions to cure such breach within a reasonable period of
time have promptly been initiated and continue to be diligently pursued, meeting
reasonable milestones to cure), then such notice shall be deemed to be
withdrawn.
(e) If the Data Access Agreement terminates, SB and Quest each
shall have the right to immediately terminate this Agreement.
SECTION 7.14. EXCULPATION AND INDEMNIFICATION. During the
period prior to the IPO Date, the Constitutive Documents shall provide, subject
to Applicable Law, that:
(a) none of the Members nor any of their respective affiliates
(other than IX Company) nor any director, officer, employee,
stockholder, partner, member, agent or representative of IX Company, of
any Member or of their respective Affiliates (each an "INDEMNIFIED
PERSON") shall be liable to IX Company or to the Members for any loss,
claim, damage or liability arising from, related to, or in connection
with, such Constitutive Documents or IX Company's business or affairs,
except for any loss, claim, damage or liability determined by final
judgment of a court of competent jurisdiction to have resulted from
such Indemnified Person's acts or omissions taken or omitted, as
applicable, in bad faith, involving intentional misconduct or a knowing
violation of law or in which the Indemnified Person personally gained
in fact a financial profit or other advantage to which the Indemnified
Person was not entitled;
(b) IX Company shall, to the fullest extent permitted by
Applicable Law, indemnify and hold harmless each Indemnified Person
against any losses, claims, damages or liabilities to which such
Indemnified Person may become subject in connection with any matter
arising from, related to, or in connection with, such Constitutive
Documents or IX Company's business or affairs, except for such losses,
claims, damages or liabilities as are determined by final judgment of a
court of competent jurisdiction to have resulted from such Indemnified
Person's acts or omissions taken or omitted, as applicable, in bad
faith, involving intentional misconduct or a knowing violation of law
or in which the Indemnified Person personally gained in fact a
financial profit or other advantage to which the Indemnified Person was
not entitled;
(c) notwithstanding anything else contained in such
Constitutive Documents, the indemnity obligations of IX Company under
Section 7.14(b) shall:
(i) be in addition to any liability that IX Company
may otherwise have to each Indemnified Person;
<PAGE>
30
(ii) extend upon the same terms and conditions to the
directors, committee members, officers, stockholders,
partners, members, employees, agents and representatives of
each Indemnified Person;
(iii) be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of
each Indemnified Person and any such Persons; and
(iv) be limited to the assets (including rights under
any insurance contracts) of IX Company; and
(d) in no event will the exercise by any Member or IX Company
of any rights provided them under any agreement entered into between IX
Company and such Member, that is not a part of the Constitutive
Documents, entitle such Member to any right of exculpation or
indemnification under this Section 7.14.
SECTION 7.15. INSURANCE. IX Company shall maintain a
commercially reasonable amount of general liability insurance against claims
from third parties arising out of IX Company's business, but only to the extent
such insurance is generally available on commercially reasonable terms.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties as of the day and year set forth below.
Accepted and agreed to by:
SMITHKLINE BEECHAM PLC,
by
/s/ DONALD F. PARMAN
--------------------------------
Name: Donald F. Parman
Title: Authorized Signatory
QUEST DIAGNOSTICS INCORPORATED,
by
/s/ KENNETH W. FREEMAN
--------------------------------
Name: Kenneth W. Freeman
Title: Chief Executive Officer
<PAGE>
Exhibit 10
GLOBAL CLINICAL TRIALS AGREEMENT, dated as of August 16, 1999
(this "AGREEMENT"), between SMITHKLINE BEECHAM PLC, a public
limited company organized under the laws of England ("SB"),
and QUEST DIAGNOSTICS, INCORPORATED, a Delaware corporation
("QUEST") .
WHEREAS, SB and Quest have entered into a Stock and Asset
Purchase Agreement dated as of February 9, 1999 (the "PURCHASE AGREEMENT"),
whereby, among other things, SB has agreed to sell, and Quest has agreed to
purchase, 100% of the outstanding shares of capital stock of SBCL, Inc. and
certain other assets;
WHEREAS, in the Purchase Agreement, SB agreed to contract with
Quest to provide, on an exclusive basis, all of its clinical trials testing
requirements for a period of 10 years, subject to certain exceptions set forth
in this Agreement; and
WHEREAS, it is a condition to the consummation of the
transactions contemplated by the Purchase Agreement that the parties hereto
execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, the parties hereto agree as follows:
SECTION I. STATEMENT OF WORK
1 For any Study (this term and certain other terms are defined in Section
III(1); Section III(2) identifies the sections of this Agreement in
which capitalized terms used and not defined in Section III(1) are
defined) which SB requests Quest to perform under this Agreement, Quest
shall provide the Services for each Study requested by SB, in each case
pursuant to the terms set forth in this Agreement, including the
Addendum for such Study.
2 For each Study requested by SB, SB and Quest shall execute an addendum
to this Agreement substantially in the form of Exhibit A or in such
other form as may be mutually agreed by SB and Quest (as amended from
time to time, an "ADDENDUM") setting forth, among other things, the
Services to be performed by Quest for such Study, the costs for such
Services, implementation times for such Services, estimated
transportation fees for such Study and the clinical protocol for such
Study. Each Addendum shall apply only to the Study for which it is
executed and shall be valid and binding upon its execution by
authorized representatives of SB and Quest. Any change in the scope of
Services
<PAGE>
described in an Addendum which shall have a material effect on the
total laboratory testing costs and/or costs or fees for other Services
specified in such Addendum shall be set forth in a written amendment to
such Addendum executed by authorized representatives of SB and Quest.
3 In providing Services under this Agreement, Quest shall comply with all
applicable governmental laws, rules and regulations, including the
United States Clinical Laboratory Improvements Amendments (CLIA 88),
good clinical laboratory practices, and generally accepted industry
standards for quality assurance and quality control, and shall operate
in accordance with all applicable regulations, standards and
recommendations of the Food and Drug Administration and other relevant
regulatory authorities with respect to the performance of laboratory
testing for clinical trials and related services.
SECTION II. EXCLUSIVITY
1 Subject to this Section II(1) and Sections II(2), XIII (2), XXI, and
XXIV, SB shall exclusively use (and cause the SB Subsidiaries to use)
Quest to conduct any Study for which SB or any SB Subsidiary, in the
ordinary course of its business, would use a clinical laboratory. As of
the date of this Agreement, SB is required to use Quest on an exclusive
basis only in countries included within the North American Territory or
the European Territory. SB and Quest intend to review on an ongoing
basis throughout the Term of this Agreement Quest's ability to provide
Services to SB in countries other than those included within the North
American Territory and the European Territory. Upon the mutual
agreement of SB and Quest, additional countries may be added to the
scope of this Agreement, and if so added, SB shall use Quest to provide
Services to it (and to any SB Subsidiary) for Studies performed in
these additional countries on an exclusive basis, subject to the
limitations set forth in this Section II, and Quest shall provide
Services to SB and any SB Subsidiary for Studies performed in such
additional countries pursuant to the terms of this Agreement.
Similarly, SB and Quest may agree to remove countries included within
the definitions of the North American Territory and the European
Territory from the scope of this Agreement. Upon such mutual agreement
of SB and Quest, SB and any SB Subsidiary shall not be required to use
Quest on an exclusive basis for Studies performed in any countries
removed from the scope of this Agreement.
The exclusivity provisions of this Section II shall also apply to any
Contract Research Organization ("CRO") retained by SB or an SB
Subsidiary, such that for any Studies for which SB or its Subsidiary
uses a CRO, SB or its Subsidiary, as appropriate, shall exclude
laboratory services from its contract with such CRO, and SB or its
Subsidiary shall use Quest to perform the laboratory services for such
Study. In such a situation, Quest shall provide the laboratory services
<PAGE>
for such Study and shall provide laboratory results to the CRO and to
SB, as specified in the Addendum for the particular Study. SB shall
have responsibility for oversight of the actions of any CRO retained by
SB or an SB Subsidiary to conduct a Study for which Quest performs
Services under this Agreement.
2 CERTAIN EXCEPTIONS. Notwithstanding the foregoing, the parties hereto
agree that SB shall not be required to use (or to cause the SB
Subsidiaries to use) Quest to conduct:
(i) any Study requiring onsite clinical pharmacology testing under
the direct management of any of SB's or an SB Subsidiary's
clinical pharmacology units currently located at Presbyterian
Medical Center in Philadelphia, Pennsylvania, at SB's
facilities in Harlow, England, and at Adenbrookes Hospital in
Cambridge, England, or of any similar clinical pharmacology
units established during the Term;
(ii) any assay for the DMPK of pharmaceutical compounds; provided,
however, that if any of the testing referred to in (i) or (ii)
is to be performed by a non-SB Subsidiary, such testing shall
be subject to the requirements of this Agreement;
(iii) for any Study which is being conducted as of the date hereof
(or in the case of an SB Subsidiary acquired or formed after
the date hereof, for any Study which is being conducted as of
the date of such acquisition or formation), any laboratory
testing which is conducted as part of that Study by Persons
other than Quest;
(iv) any Phase IV Study in the European Territory in a country
other than the United Kingdom, if such Phase IV Study is
performed by a local clinical laboratory that is not a
competitor of Quest in such country;
(v) any testing in connection with a Study that requires immediate
turn-around time that Quest cannot provide, including
microbiology testing;
(vi) any testing in connection with a Study that is usually
performed by the Investigators participating in a Study;
(vii) any Study funded by a Person, in whole or in part, other than
SB or an SB Affiliate, where use of a laboratory other than
Quest is required by that Person; PROVIDED, HOWEVER, that SB
shall use reasonable commercial efforts to have Quest engaged
to conduct any Studies required in the
<PAGE>
course of such research and development and, if so engaged,
such Studies shall be conducted pursuant to the terms of this
Agreement.
(viii) any Study conducted in connection with SB's (or any SB
Affiliate's) research and development activities undertaken
pursuant to any co-development, co-promotion, collaborative
research, licensing or similar agreement with a third party
which is not an Affiliate Controlled by SB (E.G., joint
ventures, partnerships, licensing or co-development contracts)
where use of a laboratory other than Quest is required by that
Person, except for Studies conducted by SB for diaDexus LLC;
PROVIDED, HOWEVER, that SB shall use reasonable commercial
efforts to have Quest engaged to conduct any Studies required
in the course of such research and development and, if so
engaged, such Studies shall be conducted pursuant to the terms
of this Agreement.
3. Notwithstanding the foregoing, Quest shall have the option to decline
to perform any Studies under this Section II that SB or an SB
Subsidiary requests Quest to perform, and should Quest decline to
perform the Study, SB or the SB Subsidiary shall be free to use a
clinical laboratory other than Quest to perform such Study.
SECTION III. DEFINITIONS
1 For purposes of this Agreement:
"AFFILIATE" means, with respect to any Person, any Person which,
directly or indirectly, Controls, is controlled by, or is under common
Control with, the specified Person. An Affiliate, with respect to SB,
shall include the SB Subsidiaries.
"ARCHIVAL SPECIMEN" means a type of specimen which is placed in
long-term storage by Quest, at SB's request, either for a particular
use or for undefined future use.
"CDM" means the Clinical Data Management department of SB and any
successor department.
"CHANGE IN CONTROL" means any event where:
(a) any "person" or "group" (as such terms are used in Section
13(d) and 14(d) of the of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") is or becomes the "beneficial
<PAGE>
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act) of shares representing more than 50% of the combined
voting power of the then outstanding securities entitled to
vote generally in elections of directors of SB (the "Voting
Stock"); or
(b) SB consolidates with or merges into any other corporation, or
conveys, transfers or leases all or substantially all of its
assets (other than to a wholly-owned subsidiary of SB) or any
other corporation merges into SB, and, in the case of any such
transaction, the outstanding common stock of the SB is
reclassified into or exchanged for any other property or
security, unless the shareholders of the SB immediately before
such transaction own, directly or indirectly, immediately
following such transaction, at least a majority of the
combined voting power of such outstanding power of the
outstanding voting securities of the corporation resulting
from, or to which its assets were conveyed, transferred or
leased in connection with, such transaction in substantially
the same proportion as their ownership of the Voting Stock
immediately before such transaction;
"CLW" means a clinical laboratory worksheet, a document substantially
in the form of Exhibit B-1 in the case of any Study in the North
American Territory, and in the form of Exhibit B-2 in the case of any
Study in the European Territory, or in such other form as may be
mutually agreed by SB and Quest. Such document shall be completed by
representatives of both SB and Quest with respect to any Study. The CLW
for any Study is hereby deemed a part of the Addendum for such Study
and all references herein to any Addendum include the CLW, as amended,
executed in connection therewith.
"CONTROL" means, as applied to any Person, 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.
"DMPK" means distribution, metabolism and pharmokinetics of a
pharmaceutical compound (measurement of the pharmaceutical compound or
its metabolites in body fluid).
"EUROPEAN TERRITORY" means the countries of Austria, Belgium, the Czech
Republic, Denmark, Finland, France, Germany, Holland, Hungary, Iceland,
Ireland, Italy, Lithuania, Luxembourg, Norway, Poland, Portugal,
Slovakia, Sweden, Spain, Switzerland and the United Kingdom.
<PAGE>
"INVESTIGATOR" means a physician or other clinician who oversees the
conduct of a Study.
"INVESTIGATOR MANUAL" means a document used by the Investigators and
their staffs which provides precise instructions concerning specimen
collection, transport and reporting and includes laboratory
certifications.
"INVESTIGATOR (LAB REQUIREMENT) SUMMARY" means a condensed version of
the Investigator Manual.
"PERSON" means any individual, firm, corporation, partnership, limited
liabilities company, trust, joint venture, governmental entity or other
entity.
"REFERRAL SPECIMEN" means a type of specimen which is sent by Quest to
another laboratory for analysis, with the consent of SB or an SB
Subsidiary.
"RESULT/VIEW(TM)" means the Quest software product for providing near
real-time access to clinical trial laboratory data of laboratory tests
performed by Quest.
"SB CLINICAL STUDY LEADER" means with respect to any Study, the SB
contact identified in the Addendum for such Study as the lead contact
at SB for such Study.
"SB SUBSIDIARY" means (i) any Subsidiary of SB existing as of the date
hereof or formed or acquired by SB during the Term of this Agreement;
PROVIDED, HOWEVER, that the term "SB Subsidiary" shall not include SB
Biologicals unless, and only to the extent, SB elects to have SB
Biologicals conduct any Studies under this Agreement, and (ii) any
Affiliate of SB which SB elects to have Studies conducted under this
Agreement, but only to the extent of such election, in the case of each
clauses (i) and (ii), for so long as such Subsidiary or Affiliate
remains a Subsidiary or Affiliate of SB.
"SB BIOLOGICALS" means SmithKline Beecham Biologicals S.A., a company
organized under the laws of Belgium.
"QUEST PROTOCOL ADMINISTRATOR" means, with respect to any Study, the
Person appointed by Quest to manage the protocol for such Study. The
protocol administrator will interact on a regular basis with a
designated SB contact. Both the protocol administrator and the SB
contact for any Study shall be identified in each Addendum.
<PAGE>
"SERVICES" means laboratory testing, extraction of DNA, specimen
storage for both analyzed and nonanalyzed specimens, specimen
transportation, other distribution of materials or supplies, study
preparation and management, data management (including access to
Result/View(TM) as provided in Section VII(10), management reporting,
technical support, reporting of test results, maintenance of good
laboratory practices and documentation of quality assurance and control
and all other customary services performed, in each case, in connection
with a Study.
"STUDY" means clinical trials or clinical investigations on humans for
a pharmaceutical compound.
"STUDY BLIND" means, with respect to any Study, the confidential
assignment of participants to a treatment group in order to minimize
patient, Investigator and Study sponsor bias.
"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 50% or more 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.
"3I SHEETS" means a request form sent to all International
Investigators requesting certain site information, including the
location of the Investigator and Co- Investigators, the primary contact
person and his or her telephone and facsimile numbers, the location for
specimen collection and the location to which patient reports should be
sent.
"NORTH AMERICAN TERRITORY" means the United States of America,
including Alaska, Hawaii and Puerto Rico, and Canada and Mexico.
"TERM" means the period of time defined in Section XX(1).
2 The following terms have the meanings set forth in the Sections set
forth below:
Term Section
------------------------------------------
Addendum I(2)
Alerts XI(2)
Annual Minimum XXIV(2)
Change in Control Date XXIV(1)
Clinical Research Organization II(1)
<PAGE>
DMPK Specimens IX(8)
Existing SB Compounds XXIV(2)
Indemnified party XXII(3)
Initial Minimum XXIV(2)
Lab Test List XIII(2)
Fee Schedule Discount XV(1)
Fee Schedule XV(1)
Material Breach XXI
Most Favored Nations Pricing XV(1)
Other Client XV(2)(b)
Purchase Agreement Preamble
SB Biologicals II(1)
Successor Company XXIV(1)
Supported Locations VII(10)
Quest Director IV(3)
Quest Internal Systems XVII(2)
Third Party Claim XXII(3)
Voting Stock III
Year 2000 Compliance XVII(1)
<PAGE>
SECTION IV. RELATIONSHIP MANAGEMENT
1 Quest shall designate individuals employed by Quest who are approved by
SB to be located at SB's facilities in Upper Providence, Pennsylvania,
Collegeville, Pennsylvania, and Harlow, England, or at such other
locations as may be mutually agreed by SB and Quest, to act as liaison
and relationship managers between Quest and SB's Clinical Research and
Development department.
2 Within thirty days of the date of this Agreement, SB and Quest shall
form an Oversight Team that shall have oversight responsibility for the
parties' performance of their respective obligations under this
Agreement and the relationship between the parties. The Oversight Team
shall be composed of at least two representatives each appointed by
Quest and SB. SB and Quest may elect to include within the Oversight
Team representatives from any CRO routinely used by SB for the
performance of Studies.
3 At a minimum, the Oversight Team shall participate in quarterly
performance and business review meetings, at a location to be mutually
agreed by SB and Quest, to discuss the Quest performance metrics and
measures set forth in Section VIII and any other issues arising under
this Agreement; PROVIDED, HOWEVER, that during the period from the date
of this Agreement through the third anniversary of such date, if
requested by SB, such meetings shall occur monthly. At any time SB
believes that Quest is failing to provide Services pursuant to the
terms of this Agreement, SB may require Quest to participate at a
meeting to discuss such failures at a location to be mutually agreed by
SB and Quest as promptly as practical after SB notifies Quest of the
request to have such meeting. At a minimum, the director of the Quest
clinical trials center (the "QUEST DIRECTOR") shall attend any meetings
required by this Section VI(2). The other attendees of such meetings
shall be mutually agreed by SB and Quest.
SECTION V. REVIEW AND IMPROVEMENT OF SERVICES
1 The parties hereto acknowledge and agree that (i) the pharmaceutical
industry and clinical trials industry frequently undergo change,
including technological advancements in connection with the conduct of
Studies and abilities to communicate the results of the Studies, and
(ii) the parties hereto intend the performance by Quest of Services
under this Agreement to reflect the improvements available as a result
of such changes.
2 SB and Quest shall meet at least one time annually to review the terms
of this Agreement which govern the Services Quest must provide,
including Sections VIII through Section XVI, and to negotiate in good
faith and execute
<PAGE>
and deliver amendments to this Agreement providing for quality and
cycle time improvements and other changes in such Services in response
to technological, operational or other advancements or changes. It is
acknowledged and agreed that, among other things, Quest may be required
to invest in new equipment and staff as a result of such amendments.
SECTION VI. CERTAIN PERFORMANCE METRICS AND MEASURES
1 With respect to any Study, Quest shall provide any Services required
pursuant to this Agreement for such Study within the relevant
implementation time specified in Exhibit D, as Exhibit D may be amended
from time to time pursuant to Sections V or XXIII; PROVIDED, HOWEVER,
that, with respect to any Study, to the extent an implementation time
for any Service is expressly set forth in an Addendum, Quest shall
provide such Service for such Study within the implementation time set
forth in such Addendum. In the event Exhibit D is amended, such that
the amendment causes an increase in the costs of Quest's performance of
Services hereunder, Quest and SB shall negotiate an appropriate price
adjustment under this Agreement with respect to the amended item(s)
only.
2 With respect to each Study, Quest shall maintain a system to monitor
and measure its compliance with the performance metrics and measures
set forth in Exhibit D or in the Addendum for such Study and shall
provide SB a monthly written report regarding compliance with such
metrics and measures. Quest shall provide SB with reasonable access to
the data underlying such monthly compliance reports for verification
purposes.
SECTION VII. STUDY PREPARATION PHASE
1 Four weeks before any Study is scheduled to begin, Quest will provide a
cost proposal, based on the final approved protocol for the Study, to
the designated SB Clinical Study Leader (with a copy to the SB Clinical
Development Contract Management Group) in the form of an Addendum. All
anticipated costs must be estimated, including dry ice, travel to
Investigator meetings, translations, reporting costs and storage and
transportation costs. The Addendum also will specify, among other
things, the manner, format and timing of data transmission for such
Study and the sites to be included within the Study. Each of SB and
Quest shall use its reasonable best efforts to agree on the costs for
the Study and to sign the Addendum prior to the Study start date. If SB
makes any subsequent changes to the final approved protocol that impact
the costs of the Study significantly, SB shall bear such additional
costs; provided, however, that
<PAGE>
the additional costs are reasonable and are itemized for SB in
reasonable detail. In such a situation, Quest shall incur no additional
costs without the prior approval of SB; provided, however, that Quest
may incur reasonable, additional costs if it is unable promptly to
obtain SB's approval to such additional costs and the nature of the
Study and requirements for timely performance of Services require Quest
immediately to incur such reasonable, additional costs.
2 Prior to the initiation of each Study, SB shall provide Quest with a
copy of all appropriate, approved protocols, amendments and
modifications and other necessary information. Quest will not modify or
change such information without the prior written consent of SB.
3 If the laboratory requirements for a Study involve the extraction of
DNA from a patient's specimen, it is the responsibility of the SB
Clinical Study Leader, as the Study is being set up, to provide the
Quest Protocol Administrator with the master patient informed consent
covering DNA analysis (if not specified in the protocol for such
Study). Quest shall not extract DNA from any specimen unless the
patient informed consent has been signed. Quest will include DNA tubes
in the laboratory test kits.
4 No later than four weeks before the beginning of a Study, a CLW will be
completed by representatives from SB and Quest. No later than two weeks
before the beginning of a Study, Quest will demonstrate to SB its
ability to communicate fluently with Investigators for such Study and,
if necessary, will specify to SB the languages used to communicate with
the Investigators in the relevant CLW. Quest shall ship supplies for
the Investigators in order to arrive at the Investigator sites not
later than one business day prior to the initiation of the Study.
5. Significant changes made to a Study's protocol or CLW by SB after a
schedule has been determined which necessitate additional programming
time or changing of kit contents by Quest, shall be made at SB's
expense; PROVIDED, HOWEVER, that the additional charges are reasonable
and are itemized for SB in reasonable detail. In such a situation,
Quest shall incur no additional costs without the prior approval of SB;
provided, however, that Quest may incur reasonable, additional costs if
it is unable promptly to obtain SB's approval to such additional costs
and the nature of the Study and requirements for timely performance of
Services require Quest immediately to incur such reasonable, additional
costs.
In the event SB makes any significant changes as described above for
any Study, Quest shall use its reasonable best efforts to ship supplies
for the Investigators in order to arrive at the Investigator sites not
later than one
<PAGE>
business day prior to the initiation of the Study at the site. Any
additional shipping charges incurred by Quest to comply with this
obligation shall be the responsibility of SB.
6 Investigator meetings are intended to assist in the orientation of
Investigators and their staff assigned to a Study with respect to the
laboratory procedures contained in the Investigator Manual, and the
performance of other Services as may be required by the relevant CLW.
Quest shall provide a representative at the SB-sponsored Investigator
meeting to review specimen preparation, packaging and transportation
requirements. In the European Territory, Quest shall participate in
Investigator meetings at locations and at times specified by SB upon
two weeks' prior notice. In the North American Territory, Quest shall
participate in Investigator meetings at locations and at times
specified in the relevant CLW.
Upon two weeks' prior notice from SB, and being in receipt of the
clinical protocol contained in the relevant Addendum, Quest will
provide customized presentation materials for the applicable
Investigator meeting.
Upon request by SB, Quest will provide to SB for review and comment in
advance of the Investigator meeting copies of the materials to be
presented at such meeting and will make any factual corrections
requested by SB at no charge to SB.
If Quest is not given two weeks' prior notice, additional reasonable
charges will apply for (i) Quest's preparation of customized meeting
materials and (ii) revisions to customized meeting materials resulting
from changes in SB's protocol or other changes specified by SB to
Quest; PROVIDED, HOWEVER, that the expenses underlying such additional
changes are itemized for SB in reasonable detail.
7 For Services provided in the North American Territory, Quest will
prepare and distribute to each Investigator a protocol-specific
Investigator Manual and Investigator (Lab Requirement) Summary and/or
pictogram. The purpose of the Investigator Manual and Investigator (Lab
Requirement) Summary is to provide the Investigator and the
Investigator's staff with precise instructions concerning specimen
collection, transport and reporting. In the North American Territory,
the Investigator Manual and Investigator (Lab Requirement) Summary
shall be provided in English, Spanish and French.
In the European Territory, Quest will prepare and distribute to each
Investigator a customized Investigator Manual and/or pictogram. The
Investigator Manual and
<PAGE>
Investigator (Lab Requirement) Summary is available in English, French,
Spanish, Italian, German and Dutch, and in such additional languages
requested by SB. Upon written request from SB, Quest will translate the
Investigator Manual and/or Investigator (Lab Requirement) Summary into
other languages for an additional charge per language.
For any additional countries that may be added to this Agreement, Quest
will provide the Investigator Manual and/or the Investigator (Lab
Requirement) Summary and/or pictogram in languages as specified in the
Addendum for the particular Study. Quest shall provide such materials
in English, French, Spanish, Italian, German, and Dutch at no
additional charge, and SB and Quest shall negotiate in good faith the
costs of any translations into other languages required by SB.
Quest shall use its reasonable best efforts to provide such additional
translations within two weeks of request.
8 Upon request from SB, Quest will provide telephone in-service training
to staff at clinical study sites at no additional charge to SB. Upon
request and with two weeks' prior notification from SB, Quest will
provide on-site field service training for protocol initiation and/or
ongoing support. Costs associated with this Service (an additional
charge per day plus travel and accommodation expenses) shall be the
responsibility of SB.
Quest will make available, upon SB's request, professional laboratory
consulting services at SB and/or Investigator sites beyond those
consulting services generally provided by Quest in connection with a
Study. Any costs associated with these services shall be agreed to in
advance by Quest and SB.
9. Quest will provide SB with technical support Services, including
provision of data transmission and test codes and remark codes, when
appropriate. Quest, with input from SB, will develop a standard format
for data transmission and will create datasets prior to the initiation
of a Study to transmit records. Quest shall monitor data to ensure
trouble-free transmission to CDM. Quest must confirm to SB that all
data management systems required for any Study are in place or shall be
in place, prior to the commencement of such Study. The costs for any
data programming requested by SB over and above Quest's usual
programming and technical Services provided to SB shall be reimbursed
by SB; provided, however, that Quest shall provide SB with an
itemization of such costs prior to implementing any programming
changes.
10. In addition to the technical support Services set forth in Section
VII(9) above, Quest shall provide SB with access to Result/View(TM) for
all Studies for which
<PAGE>
Quest provides Services under this Agreement. Quest hereby provides SB
with a royalty-free, nonexclusive, nontransferable right to use the
Result/View(TM) software to access Quest's database related to the
Studies performed under this Agreement and to download data relating to
Services provided by Quest for any Study performed under this Agreement
and to use any materials or documentation associated with the
Result/View(TM) software. SB shall be free to modify the
Result/View(TM) software for its own use. During the Term of this
Agreement, Quest shall not charge SB with any site license fee for use
of the Result/View(TM) software, regardless of the country or location
in which Result/View(TM) is used, and SB shall not be obligated to make
any payment to Quest for such license fees. In addition, Quest shall
provide training, installation and technical support services for
Result/View(TM). SB shall bear the cost of any training, installation
or technical support services related to Result/View(TM) provided by
Quest. Quest and SB shall work in good faith to determine the
appropriate level of support services to be provided by Quest with
regard to the provision of Result/View(TM) and an appropriate
allocation of costs for such support services.
SECTION VIII. STUDY MANAGEMENT
1. The Quest Protocol Administrator for any Study will interact on a
regular basis with the SB Clinical Study Leader or other designated SB
contact who shall be specified in each Addendum. Quest shall use its
reasonable best efforts to retain such administrator's services for the
length of each Study to which they have been assigned, in order to
maintain the quality and consistency of Services. In addition, Quest
shall provide a qualified back-up to such Protocol Administrator. If
such administrator's responsibilities change during the course of an
Addendum, Quest shall notify the designated SB contact of such change.
Quest shall ensure that the level, quality and continuity of Services
are maintained at the levels required by this Agreement despite any
changes in personnel at Quest.
2 Quest will provide to SB and Investigators a toll-free telephone number
for answering questions related to the Services. Quest shall also
provide to SB and Investigators the names and telephone numbers of
Quest contacts who can answer testing related questions and take orders
for supplies.
3 For Studies in the European Territory, Quest will provide sufficient
personnel to communicate with Investigators and SB personnel in
English, French, Spanish, Italian, German and Dutch, as need be
depending on the language requirements of the country in which the
particular Study is performed. For Studies in both the
<PAGE>
North American and European Territories, Quest will provide SB with
access to a staff pathologist or an appropriately qualified Ph.D.- or
M.D.-level staff member.
4 Quest technical support will be provided to interact with SB and any SB
designated SB agent or subcontractor for problem resolution. Quest will
use its reasonable best efforts to resolve any technical errors
promptly upon identification of the problem.
SECTION IX. SPECIMEN TRANSPORT
1 Quest will provide for courier service for shipment of specimens from
an Investigator to Quest, the costs, timing and service provider of
which shall be as mutually agreed by Quest and SB, based upon the
requirements specified in the relevant CLW. In any event, Quest shall
use its reasonable best efforts to provide courier service to
Investigators on weekends or holidays in the event of an unanticipated
patient visit. Quest shall indicate to the SB Clinical Study Leader or
other designated SB contact any limitations on courier service which
would impede proper and/or timely collection and delivery of supplies
or specimens.
2 Quest will provide a tracking system to ensure pick up at Study sites
and delivery to Quest in line with the specifications required and
agreed to by protocol and reflected in the Addendum for a particular
Study. The tracking system shall be that which is currently in place at
SmithKline Beecham Clinical Laboratories, with such modifications as
Quest may make to the system after the date of this Agreement to
provide specimen pick up Services in both the North American and
European Territories. Such tracking system will be available to SB upon
request. Any requests by SB for tracking of specimens in excess of the
usual tracking system provided by Quest in the North American and
European Territories shall be discussed and agreed to by the parties.
Additional costs, if any, associated with the excess tracking
requirements, will be charged to SB and agreed upon between SB and
Quest.
3 From the point of pick up of specimens from the Investigator by a
courier employed by Quest under any Addendum, all shipping, handling,
storage and disposal of specimens shall be in accordance with any and
all applicable rules and regulations.
4 Quest shall be compensated at reasonable cost for emergency delivery
and/or transportation Services authorized in writing by SB which are
not included in the agreed to price on the applicable Addendum.
<PAGE>
5 Quest may be required to provide for shipment of specimens from Quest
to other laboratories or to SB locations as described in the Addendum.
Shipping methods and documentation for clinical sample shipments shall
be in accordance with any and all applicable rules and regulations, and
in compliance with guidelines set forth by the courier service. In
addition, Quest shall be prepared to receive and analyze specimens that
are referred by SB to Quest from other laboratories.
6 If requested by SB, Quest may be required to send Referral Specimens to
other laboratories for analysis. Quest shall be responsible for
obtaining, handling, shipping and reporting Referral Specimens in
accordance with any and all applicable rules and regulations. Quest
will bill SB for the cost of testing Referral Specimens (which is the
amount Quest is billed by the referral laboratory) plus a referral
service fee per specimen. This referral service fee includes specimen
transport from the Investigator sites to Quest in the North American
Territory, specimen referral (including specimen tracking and
transport), and results reporting to SB. In the European Territory,
inbound transportation costs will be agreed with SB. Any fee increase
imposed by the referral laboratory will be passed on to SB.
7 Archival Specimens shall be stored and maintained by Quest for the
length of time and under storage conditions as described in the CLW for
the fees described in Section XV(15). Archival Specimens may be shipped
to SB or to others as specified in the relevant CLW or as otherwise
requested by the designated SB contact. Labeling requirements for
Archival Specimens to be returned to SB shall be specified in each CLW.
8 If requested by SB, Quest will be required to send any DMPK specimens
received by Quest in extended storage to other laboratories for
analysis ("DMPK SPECIMENS"). Quest will be responsible for handling and
shipping DMPK Specimens. Quest will bill SB for the cost of storage as
detailed in Exhibit A. This storage fee includes specimen transport
from the Investigator sites to Quest in the North American Territory,
except where non-Quest transport is used. In the European Territory,
inbound transportation costs will be charged to SB. DMPK specimens
shipped to Quest designated for extended storage shall be stored and
maintained by Quest for the length of time and under storage conditions
as described in the relevant CLW.
SECTION X. RESULT REPORTS
1 Quest shall complete test assays upon specimens received from
Investigators and shall compile patient demographic data which
accompanied such
<PAGE>
specimens. Results of test assays and patient demographic data will be
reported to Investigators and SB with the data specified, by the method
and with the frequency of transmission and turnaround as set forth in
the relevant CLW, or as otherwise requested by SB. Examples of standard
reports are available to SB upon request. Additional reports requested
by SB, which require fields of data not specified in the original CLW,
will be provided at an additional reasonable charge to SB.
2 Upon request and as directed by SB, Quest will implement any or all of
the following report format and flagging options: (i) delta flags; (ii)
blinded results; (iii) clinical significance summary; (iv) quick trend
summary; (v) toxicity grading; and (vi) report header and footer text,
and any additional format and flagging options requested by SB. If SB
requests a format or flagging which requires significant customization
of Quest's standard report format and flagging options, SB and Quest
shall negotiate in good faith an additional reasonable charge to SB for
such request.
3 The following Service options apply to report delivery to the
Investigators and SB:
WITHIN THE NORTH AMERICAN TERRITORY: One hard copy result report will
be delivered via Quest courier per visit. As an alternative, upon
request from SB, Quest will distribute to the Investigators one result
report transmitted via facsimile plus one hard copy report delivered
via Quest courier, per visit, or in such alternate reporting fashion as
requested by an Investigator (e.g., electronic reporting). SB and Quest
shall negotiate in good faith the costs of any alternate reporting
fashion requested by SB.
FROM THE NORTH AMERICAN TERRITORY TO A DESTINATION OUTSIDE THE NORTH
AMERICAN TERRITORY: One result report will be transmitted via facsimile
plus one hard copy report will be sent via standard postal service per
visit for countries other than the North American Territory.
FROM THE UNITED KINGDOM TO A DESTINATION WITHIN THE EUROPEAN TERRITORY:
One result report will be transmitted via facsimile plus one hard copy
report will be sent via standard postal service per visit.
OTHER: SB may request overnight express report delivery, or multiple
modes of delivery, at an additional charge for any of the reports
described above. The parties hereto acknowledge and agree that as
improved technology becomes reasonably available, Quest will make
available "real-time" communication or other electronic communication
between and among Quest, SB and the Investigators.
<PAGE>
SECTION XI. DATA MANAGEMENT REQUIREMENTS
1 Quest shall perform edit checks on patient demographic data on the day
that the sample is received. If Quest detects errors or omissions,
including an invalid Study number, an invalid Investigator number, an
invalid Investigator site number, an invalid patient number, an
improper visit sequencing, or patient demographics that changed from a
previous visit, then Quest shall contact the Investigators by telephone
(or other mutually acceptable method of communication) for resolution.
A record of all such changes shall be maintained by Quest. If Quest is
unable to contact the Investigators or has been unable to reach a
resolution within five business days (or within two business days if
after the last patient visit), then Quest shall notify the designated
SB contact.
2 Quest shall telephone the Investigators to notify them of lab assay
values which must be made known immediately to the Investigator (and
any medical monitors designated in the Addendum) for proper patient
care and which are defined in the relevant CLW (hereinafter "ALERTS").
In addition, Quest shall immediately provide notification to the
Investigator and medical monitor of lab assay values which would
exclude the patient from the Study and which are defined in each
clinical protocol if requested in the relevant CLW. Quest shall notify
Investigator sites within one working day (limited to Monday through
Friday) of the completion of testing, or as specified in the CLW. If
Quest is unable to reach the Investigator after Quest has made a
minimum of two attempts, Quest shall promptly notify the SB Clinical
Study Leader, medical monitor or other designated SB contact. All
Alerts shall be automatically flagged on the hard copy laboratory
report.
3 Quest shall provide to SB a support service for queries or resolving
errors related to Quest, with such queries or errors to be resolved
within three days (or within 24 hours if after the last patient visit).
Quest also shall provide guidance for any general lab questions and
shall ensure the complete resolution of all data issues at the
completion of the Study (ensuring satisfactory completion of the
relevant Study). Quest shall track all queries raised in each Study.
4. Quest will retain all patient records and test results from any Study
for five years following the termination of each Study or for such
longer period as specified in the Addendum for a Study or as required
by applicable laws or regulations. Quest shall maintain all specimens
from a Study following the termination of the Study for the period
specified in the Addendum for a Study or for such longer period of time
as required by applicable law or regulations. Upon SB's request, Quest
shall return any specimens or data from a Study to SB, at an additional
charge to be agreed upon by SB and Quest. SB and Quest shall agree on
long-
<PAGE>
term specimen retention and specimen destruction on a Study by Study
basis. Quest shall comply with all data and specimen retention methods
established by relevant regulatory authorities. SB shall advise Quest
in writing of data or specimen retention requirements in excess of
these standards, and Quest will use its reasonable best efforts to
accommodate SB's requirements. Additional reasonable charges may apply
to any deviations to data and specimen retention standards specified
herein. Archived data may be maintained on microfiche or electronic
record, provided that a back-up exists and a hard copy can be obtained
from it if required.
SECTION XII. MANAGEMENT REPORTING
Quest will provide, upon request from SB, any or all of the following management
reports generated from Studies under this Agreement: (i) new activity report,
(ii) study status report, (iii) patient visit history report, (iv) patient trend
analysis, (v) trend analysis, (vi) tracking report, (vii) toxicity grade report,
and/or (viii) selected abnormal report, and any other standard reporting entries
as they become available. Quest will make such reports available as frequently
as SB specifies, and such reports shall be incorporated into the Result/View(TM)
format if requested by SB. Distribution will be by standard postal service or
electronically, at SB's option. An additional charge may apply for customization
or deviations to Quest's standard Study management reports and methods of
distribution.
SECTION XIII. LABORATORY METHODOLOGY
1 Quest shall not subcontract tests to any third party or send our
Referral Specimens without the prior written approval of SB. Quest
shall require any subcontractor approved by SB to enter into written
agreements requiring such subcontractor to perform the Services for
which it is the subcontractor pursuant to the terms of this Agreement,
including the terms of the confidentiality provisions in Section XVIII
and the Year 2000 compliance in Section XVII. Quest shall be
responsible for ensuring that (i) all subcontracted tests are correctly
validated and (ii) each subcontractor's sites have passed appropriate
quality audits conducted by third parties hereto within the previous 12
months. If SB approves Quest's use of a subcontractor, SB shall pay the
costs of any testing performed by such third party, as charged by the
third party to Quest.
2 On or prior to the date hereof, Quest has provided to SB a current list
of all laboratory tests Quest is capable of conducting as updated from
time to time, (the "LAB TEST LIST") and a summary of Quest's laboratory
methodology for such tests. Quest shall update such list and such
summaries at least every six
<PAGE>
months. If a Study requires a laboratory test not currently included on
the Lab Test List, or if the existing methodology used by Quest for a
particular test on the Lab Test List is not acceptable to SB, and, in
either situation, such test is a significant part of the Study, SB and
Quest shall discuss Quest's ability to validate and perform any new
test or to change test methodology for the Study prior to its
initiation. SB shall use reasonable efforts to notify Quest at a
sufficiently early stage, no less than 12 weeks prior to the Study
initiation, to allow full validation and setup of desired tests. If,
after discussions with Quest, SB determines i) that Quest will not be
able to develop and validate a test in a fashion satisfactory to SB and
in sufficient time prior to the initiation of the Study and suitable
arrangements cannot be made for Quest to use a subcontractor to perform
the test or ii) that the methodology used by Quest for such test is not
acceptable to SB, including Study critical assays, then,
notwithstanding anything else to the contrary in this Agreement, SB
shall not be obligated pursuant to Section II to use (and to cause the
SB Subsidiaries to use) Quest to conduct such Study. SB and Quest shall
negotiate in good faith when determining Quest's ability to validate a
new test or to agree on test methodology. If SB elects pursuant to this
Section to use another laboratory to perform a Study, SB may not use
any laboratory to conduct the Study unless such laboratory also is
required to conduct the relevant laboratory test or use the relevant
methodology which, in each case, was the basis for SB (or an SB
Subsidiary) not using Quest to conduct a Study pursuant to this Section
XII(2).
3 From time to time, Quest may determine it necessary to change existing
methodology and/or reference ranges as a result of modifications in the
type of reagents and/or methodologies or the discontinuance of
materials and/or supplies to support existing equipment. To the extent
practicable, Quest shall notify SB of any such change not less than
thirty days before such change is implemented, together with an
assessment of the potential impact on either validation of assays or
changes in normal ranges for tests. Quest shall not change any
methodology and/or reference ranges during the course of a Study
without the prior written consent of SB. Upon request from SB, Quest
shall provide SB with any and all method comparison data.
4. Quest shall investigate any trends identified during quality control of
its laboratory testing. Quest shall notify SB of such trends and
provide an explanation to SB regarding these trends.
<PAGE>
SECTION XIV. LABORATORY EQUIPMENT
1 Quest will ensure at all times that its computer equipment is in good,
working condition and that it has made reasonable provision for backup
equipment to avoid delays in the analysis of SB's specimens.
2 Quest will ensure that any changes in equipment being used in Studies
that will require revalidation of assays or that may have an impact on
normal ranges of tests will be communicated to SB in a timely fashion.
Quest will make no change in laboratory equipment during the course of
a Study that would require revalidation of assays, without the prior
written approval of SB. Quest shall notify SB if a failure in its
equipment causes changes in test results.
4 Quest shall ensure that the reagents and equipment used in performing
any Service hereunder, at all times, are in compliance with the reagent
and equipment standards set forth by applicable regulatory authority's
standards for such equipment and reagents.
SECTION XV. COMPENSATION
1 For laboratory testing Services provided under this Agreement, Quest
shall provide any such laboratory testing Service to SB or an SB
Subsidiary, as specified in each Addendum, at the lower of:
(i) the then lowest price (measured by percent of discount from
Quest's published fee schedule for clinical trials testing
(the "Fee Schedule") (the "Fee Schedule Discount") for such
Service or group of Services being charged by Quest to any
other client in the North American Territory (with respect to
Services to be provided in the North American Territory) or in
the European Territory (with respect to Services to be
provided in the European Territory) (the "Most Favored Nations
Pricing") and
(ii) the price for such Service calculated using a Fee Schedule
Discount off the then applicable Fee Schedule for such Service
or group of Services being charged by Quest to any other
client in the North American Territory (with respect to
Services to be provided in the North American Territory) or in
the European Territory (with respect to Services to be
provided in the European Territory), equal to (a) 32% with
respect to laboratory testing Services performed in the North
American Territory or (b) 20% with respect to laboratory
testing Services performed in the European Territory.
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The discount set forth in this Section XV(I) shall apply only to
Studies that SB initiates after the date of this Agreement.
Additionally, the Most Favored Nations Pricing shall be determined on a
test by test basis, such that if Quest provides a 40% discount to a
client for a particular laboratory test in a study, Quest must provide
the same discount to SB for the same test in any Study conducted by SB
or an SB Subsidiary after the date that Quest provided such lower price
to another client, subject to Section XV 2(b) below. Any Service or
group of Services other than a laboratory testing Service shall be
provided to SB or the SB Subsidiaries at a price equal to or less than
the price for such Service or group of Services charged to any other
client of Quest in the North American Territory or in the European
Territory, as the case may be.
2 a) For purposes of calculating, pursuant to Section XV (1), prices
subject to a Fee Schedule Discount, (i) the Fee Schedule for the most
frequently ordered laboratory testing Services performed in 1999 shall
be as set forth in Exhibits C-1 and C-2 attached hereto along with the
discounted price to be charged to SB and (ii) the prices for laboratory
testing Services performed after 1999 shall be as agreed to between SB
and Quest pursuant to Section XV(3). All laboratory testing Services
requested by SB at any time for which fees are not specified in the
Addendum shall be billed in accordance with Quest's then current Fee
Schedule, including the applicable discount, unless otherwise agreed to
by the parties.
b) For purposes of calculating the Most Favored Nations Pricing
pursuant to Section XV(1) during the Term of this Agreement, Quest
shall include all discounts and reductions in price provided to any
client in the North American and European Territories during the prior
twelve-month period (or such lesser period of time if prior to July 30,
2000), excluding any discounts and reductions in price provided by
Quest or SmithKline Beecham Clinical Laboratories at any time prior to
Quest's acquisition of SmithKline Beecham Clinical Laboratories. On a
quarterly basis, Quest shall notify SB if any of the pricing offered to
other clients in either the North America or the European Territory is
lower than pricing provided to SB in such Territories in accordance
with this Section XV. If Quest has provided more favorable pricing to a
client other than SB in contravention of this Section XV(1) (the "Other
Client"), SB shall be entitled to receive such Most Favored Nations
Pricing for any test in any Study conducted by SB or an SB Subsidiary
after the date Quest provides such lower price to the Other Client. SB
shall be entitled to receive such Most Favored Nations Pricing only for
the period that Quest extends such pricing to the Other Client. SB
shall have the right to audit Quest's records related to pricing
provided to other clients in accordance with Section XVI for purposes
of ensuring Quest's compliance with this Section XV.
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3 On December 1 of each year, Quest shall submit to SB's World Wide
Medical Director a list of the new clinical trials testing prices for
the twelve-month period beginning January 1 of the subsequent year. The
total increase in the new clinical trials testing prices from the prior
year shall equal and not exceed i) in the North American Territory, the
increase in the overall Consumer Price Index for the United States and
(ii) in the European Territory, the increase in the overall Consumer
Price Index for the United Kingdom, in each case during the twelve
month period ending September 30. The limitation on price increases set
forth in this Section XV(3) shall not apply to non-testing charges, or
to changes in test prices resulting from changes in methodology or
equipment; PROVIDED SB is notified in writing of such increases and
approves of them in writing in advance of implementation.
4 If any Study is revised after such Study's materials have been approved
in writing, SB agrees to pay Quest for Services rendered and actual
documented costs incurred in the revision of previously approved Study
materials.
5 If the initiation or conduct of the applicable Study is delayed by SB's
direct actions for more than two months such that specimen collection/
transport supplies and/or specialized testing reagents expire, SB
agrees to pay Quest for Services rendered and actual and documented
costs incurred to replace expired supplies and/or specialized testing
reagents. Quest will provide documentation reasonably evidencing the
replacement of such expired supplies or specialized testing reagents.
6 Quest shall be compensated for supplies properly sent to the
Investigators which were not used due to patient drop-out or
cancellation or termination of any Addendum. Quest will provide
documentation reasonably evidencing the delivery of such supplies.
7 Upon written request from SB, Quest, for an additional charge per
language translation, will translate the Investigator Manual and/or
Summary into languages other than English and Spanish for the U.S. and
English, Spanish, French, Italian, German and Dutch for the European
Territory.
8 Upon request and with two weeks' prior notification from SB, Quest will
provide on-site field service training for protocol initiation and/or
ongoing support. Costs associated with this service (additional
reasonable charge per day plus travel and accommodation expenses) shall
be borne by SB.
9 SB is responsible for the cost of travel and accommodation for Quest's
representatives at Investigator meetings to the extent SB has approved
their
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attendance, provided that expenses are incurred in accordance with SB's
travel policy, a copy of which has been provided to Quest.
10 Quest will make available, upon SB's request, professional laboratory
consulting services at SB and/or Investigator sites. Any costs
associated with these services shall be agreed to in advance by Quest
and SB.
11 Inbound transportation will be charged from the Investigator site to
Quest laboratories for actual commercial carrier costs plus a 10%
administrative fee. Outbound transportation of starter kits,
resupplies, dry ice and reports from Quest laboratories to the
Investigator sites will be charged at actual commercial carrier costs
plus a 10% administrative fee. Actual charges for transportation costs
will be reviewed annually, beginning at March 30, 2000 and if necessary
will be renegotiated.
12 In the event that the actual costs to Quest of courier services for (i)
specimen transport, (ii) supply shipment, or (iii) result reporting,
increases at any time during the term of a Study, whether because of an
increase in the fees charged by Quest's proprietary or commercial
courier, an increase in the cost of packaging materials used to ship
specimens, or a mandatory change in applicable regulations, Quest shall
have the right to increase the courier fees quoted herein to the same
extent as the actual increase in the invoiced cost of courier services.
13 Quest shall be compensated at reasonable cost for emergency delivery
and/or transportation Services authorized by SB which are not included
in fees noted in the relevant Addendum.
14 If, at any time, SB chooses to change the level of service provided by
the courier and that change is accompanied by an increase in the fee to
Quest, Quest reserves the right to pass that increase on to SB;
provided, however, that Quest shall make no change that decreases the
level of courier service provided without the consent of SB.
15 Quest will charge SB an annual fee for each Archival Specimen stored on
behalf of SB. The 1999 fees for North American Territory and European
storage are as stated in Exhibit A. Quest will inform SB in writing by
December 1 of each year of the fees for such storage the proposed fees
to be in effect for the subsequent year beginning January 1, if
different than the then-existing prices, and Quest and SB will
negotiate in good faith to agree on such fees as promptly as
practicable after such notification.
<PAGE>
16 Quest shall promptly invoice SB for all testing Services provided
hereunder on a monthly basis. All invoices submitted by Quest to SB
shall identify the Services rendered by Study, Investigator's name,
patient designation, tests and testing date. All payments due Quest for
Services provided shall be made to Quest within 30 days of SB's receipt
of an invoice including the above information for Services provided in
the North American Territory and within 45 days of SB's receipt of an
invoice including the above information for Services provided in the
European Territory. SB shall not be required to make payment to Quest
on any invoice unless the invoice contains all information specified
herein.
SECTION XVI. AUDITS, INSURANCE AND PERSONNEL CHANGES
1 FINANCIAL AUDITS. During the Term of this Agreement, and until two
years after its expiration or termination, SB may direct the audit of
any financial records of Quest relating to Services provided under this
Agreement, or any Addenda hereunder. Such records may include invoice
records, invoices from third parties hereto, contracts with third
parties hereto and payments relating to any Studies hereunder. To the
extent that such records are not separable from other customer records
or SB is auditing compliance with the compensation terms of Section XV,
Quest shall give reasonable access to Quest's records to such
independent auditor selected by SB and reasonably agreeable to Quest,
who shall audit the records pertaining to the Addenda, and may disclose
the results of the audit only to the extent that it relates to any
Study hereunder, or to this Agreement. In no event shall other customer
information be disclosed to SB except as a blind basis with respect to
pricing.
2 QUALITY AUDITS. SB, at reasonable times and upon reasonable advance
notice, may, at its sole cost and expense, visit Quest's testing
facilities to conduct quality assurance audits of Quest's facilities
and the procedures implemented for any Study. At its option, SB may
elect to use a third party to conduct such audit. SB or its agent must
sign Quest's standard Confidentiality Agreement at the time of its
visit to Quest's testing facilities. Quest will maintain adequate
records so as to allow SB or its agent to conduct and audit testing
Services relative to Studies as well as Quest's tracking and
measurement of performance metrics for each Study. Quest also shall
maintain records demonstrating the training and qualifications of its
employees. SB shall advise Quest in writing of any special or unusual
record keeping needs for any Study, and Quest will use its reasonable
best efforts to accommodate SB's requirements. Additional charges will
apply for any requirements in excess of Quest's usual record keeping
process; PROVIDED, HOWEVER, that Quest must itemize such charges for SB
in reasonable detail. Quest agrees to maintain such records in
confidence in accordance with applicable laws, rules and regulations.
SB shall notify Quest of any serious
<PAGE>
quality deficiencies identified in any SB audit or SB sponsored audit,
and Quest shall have three months from the date of such notification to
remedy such deficiencies. In the event that Quest does not remedy such
deficiencies within such three-month period, SB shall engage a
reputable and experienced third party to audit Quest. If such new audit
confirms the results of SB's or its agent's initial audit, Quest's
failure to remedy such deficiencies shall be deemed to constitute a
Material Breach under this Agreement for purposes of Section XXI.
3 OTHER. Quest shall provide SB with copies of (i) any audits (other than
financial or tax audits) conducted by any regulatory authority, which
audit uncovers significant deficiencies in the quality of Services
provided by Quest to SB or an SB Subsidiary, and (ii) any written
communication by any regulatory authority alleging a failure to comply
with any applicable law or regulation, including any 483 notices
received by Quest from the United States Food and Drug Administration.
4 INSURANCE. Quest agrees to keep and maintain in full force and effect
professional liability and/or comprehensive liability insurance or self
insurance that covers liability arising in connection with the Services
performed under this Agreement with minimum coverage of $2,000,000 for
each occurrence or claim and $30,000,000 in the aggregate annually.
Upon the signing of this Agreement and annually thereafter, Quest
agrees to furnish SB with a current and valid certificate of insurance
or self-insurance evidencing the extent of professional and/or
comprehensive liability coverage.
5 PERSONNEL. To ensure the continuing quality of its Services, Quest
shall notify SB of any changes in key personnel of Quest's clinical
trials business, including any change in the Quest Director or the
liaisons to SB facilities. In addition, Quest shall immediately notify
SB of any change in the Protocol Administrator for a Study.
SECTION XVII. YEAR 2000 COMPLIANCE
Quest hereby represents and warrants that Quest's ability to performs its
obligations or the Services under this Agreement before, during and after the
Year 2000 will not be affected by issues related to Year 2000 compliance. "Year
2000 compliance" requires that the design and performance specifications of the
relevant item shall include: date and century recognition, calculations that
accommodate same century and multi-century formulas and date values, and date
data interface values that reflect the century. In addition to any other rights
and remedies available to SB under this Agreement, Quest's obligation and SB's
remedy for any breach of this warranty shall be for Quest to take all reasonable
steps, including necessary repairs or replacement, to
<PAGE>
minimize the impact of the breach on the continuity and quality of performance
of Services to SB and its Affiliates.
Quest shall afford SB at least equal priority with Quest's other preferred
customers in maintaining the continuity and quality of performance of Services,
and shall make diligent and timely efforts to cure any breach of this warranty.
SECTION XVIII. CONFIDENTIALITY AND OWNERSHIP OF SPECIMENS AND DATA
1 During the performance of this Agreement, SB may provide to Quest or
Quest may generate data, test results, Studies, and other information
regarding the drug under Study, or regarding the protocols or other
information relating to research programs being conducted by SB. Quest
understands that SB considers such information to be confidential.
Quest will not use such confidential information except for the purpose
of conducting the Study for SB and will maintain the information in
confidence to the extent that it is not already known to the public and
for such time as it remains unknown to the public. Quest may disclose
such information to only those employees, agents, contractors and
consultants who are reasonably necessary to carry out the terms of this
Agreement and shall take reasonable measures to ensure that such
employees, agents, contractors and consultants maintain the
confidentiality of this information. Quest may disclose such
confidential information to any other laboratory to whom Quest refers
testing as agreed by to by Quest and SB, provided that any such
laboratory shall be obligated in writing to maintain the
confidentiality of such information to the same extent as Quest
hereunder.
2 During the performance of this Agreement, Quest may provide to SB
information regarding Quest's standard operating procedures, processes,
testing procedures, pricing and other information relating to the
clinical trials testing business conducted by Quest. SB understands
that Quest considers such information to be confidential. SB will not
use such confidential information except for the purpose of conducting
its Study and will maintain the information in confidence to the extent
it is not already known to the public and such information remains
unknown to the public. SB may disclose such confidential information to
only those employees, agents, contractors and consultants who are
reasonably necessary to carry out the terms of this Agreement and shall
take reasonable measures to ensure that such employees, agents,
contractors and consultants maintain the confidentiality of this
information.
3 To the extent confidential information is already known to the public
or becomes known to the public from any source other than the party
bound hereunder by this obligation of confidentiality, there shall be
no obligation of confidentiality. The
<PAGE>
obligation of confidentiality as set forth in this paragraph shall
survive for ten years following the termination of this Agreement. Upon
termination of this Agreement, all documents containing confidential
information shall be returned to the party who disclosed the
confidential information within sixty days of a written request.
4 All right, title, and interest in and to any specimens obtained by SB
during the course of any Study and any data generated from any Study,
whether by SB or its Affiliates, an Investigator, subcontractor or
other Person or by Quest in the course of providing Services pursuant
to this Agreement are the proprietary rights of SB and its Affiliates,
and all ownership rights in such specimens and data shall remain with
SB and its Affiliates. Nothing herein or in any Addendum shall grant or
be deemed to grant to Quest any rights in such property of SB or its
Affiliates. Quest acknowledges and agrees that it shall have no claim
to any specimens or data obtained by SB or its Affiliates or generated
on its behalf by Quest or any Investigator, subcontractor, agent or
Person during the course of any Study. Upon request of SB, Quest shall
return all specimens and data to SB; PROVIDED, HOWEVER, that Quest may
retain copies of any data necessary to satisfy applicable regulatory
requirements.
SECTION XIX. CANCELATION
In the event that a Study is canceled by SB after Quest has been authorized to
render start-up Services, including (i) the purchase of specialized testing
reagents and/or supplies, (ii) preparation and/or distribution of specimen
collection/transport supplies, or (iii) protocol administration and/or data
management Services, Quest, at its sole option, may charge SB, and SB agrees to
reimburse Quest, for actual Services rendered and actual costs incurred in the
set-up of the Study in each case, upon receipt by SB of reasonable documentation
evidencing such Services and such costs.
SECTION XX. TERM AND OBLIGATIONS SURVIVING TERMINATION
1 The Term of this Agreement shall commence on the date hereof and shall
end on the earlier to occur of (i) the tenth anniversary of the date
hereof and (ii) the date this Agreement is otherwise terminated
pursuant to its terms.
2 If this Agreement is terminated, this Agreement shall become void and
of no further force or effect, except that (i) the obligations set
forth in this Agreement (including in the Addenda) with respect to any
Study which has not been completed at the time of such termination and
(ii) the obligations set forth in Sections XV, XVI, XVIII, XX and XXII
shall, in each case, survive such
<PAGE>
termination, unless otherwise separately terminated or canceled in
writing by SB and Quest; PROVIDED, HOWEVER, that in the event that this
Agreement is terminated by SB as a result of a Material Breach, SB may
elect, in its sole discretion, also to terminate any Study which has
not been completed at the time of such termination with no further
obligation to Quest except for liabilities accrued but unpaid at the
time of such termination.
SECTION XXI. MATERIAL BREACH
1 A "MATERIAL BREACH" by Quest of this Agreement means any of the
following:
1.1 Any failure to provide Services with respect to any Study pursuant
to the terms of this Agreement which failure results (or, if after SB
becomes aware of such failure, without the use of substantial resources
of SB not initially planned or budgeted and not reimbursed by Quest
would have caused) a substantial delay, which delay is caused solely by
the failure of Quest to provide Services under this Agreement, in any
of
(a) the initiation or completion of the conduct of a Study
that is pivotal to SB or an SB Subsidiary; provided, however,
that SB shall advise Quest at the quarterly Oversight Team
meetings of the Studies which it deems to be pivotal;
(b) the completion of the reporting of the laboratory results
of such Study or of a clinical Study report or other
regulatory submission for such Study;
(c) the acceptance by the relevant regulatory authority of the
results of such Study, clinical Study report or regulatory
submission for such Study; or
(d) the completion of the regulatory review process (E.G.,
such failure results in additional for-cause audits or
regulatory questions related to laboratory issues);
1.2 Any failure to satisfy, in any material respect, the U.S. Clinical
Laboratory Improvements Amendments (CLIA 88), or good clinical
laboratory practices or generally accepted industry standards for
quality assurance and quality control, including the standards set
forth in the United States Federal Food, Drug and Cosmetics Act or
promulgated by the College of American Pathologists, or any failure by
Quest promptly to remedy any deficiencies uncovered in any audit by the
FDA or equivalent European regulatory authority which jeopardizes
Quest's license to operate a clinical laboratory;
<PAGE>
1.3 Repeated and continued failure to provide Services pursuant to the
terms of this Agreement which failures are not promptly resolved after
notice from SB, including, without limitation:
a) repeated and continued failures to satisfy in any material
respect the requirements of this Agreement with respect to
data management and reporting of test results;
b) repeated and continued failure to satisfy the standards or
requirements for Study preparation, management or conduct in
this Agreement (E.G., the timely and accurate provision of
supplies and materials and maintaining the Study Blind);
c) the failure, with respect to 5% of Studies within any 12
month period, to provide 90% of the testing sites for any such
Studies with the supplies required for such Study in the
implementation time specified in this Agreement for such
Studies;
d) any error in, or repeated and continued failure in quality
of, Services provided by Quest under this Agreement which
causes Investigators for any Study to withdraw their
participation in any Study;
1.4 Any Material Breach that occurs pursuant to Section XVI(2); and
1.5 Any other material breach by Quest of the terms of this Agreement.
2 A "MATERIAL BREACH" by SB means any material breach by SB of the terms
of this Agreement.
3 REMEDIES FOR MATERIAL BREACH.
3.1 REMEDIES. In the event of a Material Breach under Sections XXI
(1.2) through XXI (1.5), provided Quest has failed to cure the breach
(if curable) within the cure period set forth below in Section XXI (4),
or in the event of a Material Breach by Quest pursuant to Section XXI
(1.1), SB may terminate this Agreement immediately or, in its sole
discretion, terminate only its obligation in Section II to exclusively
use Quest without terminating the entire Agreement, or terminate in the
geographic area where the Material Breach occurred; HOWEVER, that to
the extent that a Material Breach relates solely to Services of Quest
in the European Territory, SB may only terminate this Agreement with
respect to Studies in the European Territory or, in its sole
discretion, terminate only all its obligations in Section II to
exclusively use Quest in the European Territory;
<PAGE>
PROVIDED, HOWEVER, that if, upon the occurrence of a Material Breach,
SB elects, in its sole discretion, to terminate only its obligations in
Section II to exclusively use Quest (whether with respect to the North
American Territory and/or the European Territory) without terminating
the entire Agreement, to the extent SB continues to use Quest to
conduct any Studies in the North American Territory or the European
Territory, as the case may be, after such termination, such Studies
shall be conducted pursuant to the terms set forth in this Agreement.
Notwithstanding the foregoing, if SB elects to terminate its
obligations to exclusively use Quest in the event of a Material Breach,
SB and Quest shall renegotiate the compensation provided by SB for
Services provided under this Agreement.
3.2 ADDITIONAL REMEDIES FOR MATERIAL BREACH. If there is a Material
Breach by either party under this Agreement, which breach is not cured
pursuant to Section XXI (4), the non-breaching party shall be entitled
to any and all remedies available at law and equity or under this
Agreement, including, without limitation, injunctive relief against the
breaching party to require it to comply with its obligations under this
Agreement.
4 CURE PERIODS RELATED TO BREACH. For any Material Breach by SB and any
Material Breach by Quest pursuant to Sections XXI (1.2) through (1.5),
the non-breaching party shall provide notice to the breaching party of
the Material Breach, with 30 days to cure such breach. If the Material
Breach is cured during the 30 day period (or if not curable within a 30
day period, the breaching party has commenced the cure and continues to
diligently work, meeting mutually agreed to milestones, to cure the
breach), the notice of breach will be deemed withdrawn. Any Material
Breach by Quest pursuant to Section XXI (1.1) shall not be subject to
the cure period specified herein and, upon the occurrence of such
Material Breach, SB may immediately terminate this Agreement or
exercise its rights as provided in Section XXI (3) above.
5. FORBEARANCE IN DECLARING MATERIAL BREACH. SB agrees that it shall not
terminate this Agreement in the event of a Material Breach (i) for the
three month period commencing on the date of this Agreement or (ii) for
the six-month period commencing on the date of this Agreement if such
breach is the result of Quest's repeated and continued failure to
comply with the Performance Metrics and Measurements set forth in
Exhibit D. Notwithstanding the foregoing, SB may notify Quest of a
Material Breach during such three-month or six-month period, including
any failure to comply with the Performance Metrics and Measurements set
forth in Exhibit D, and Quest shall use its best efforts to remedy any
breaches and failures in the quality of Services provided to SB or an
SB Subsidiary during such three- month or six-month period.
<PAGE>
SECTION XXII. INDEMNIFICATION
1 INDEMNIFICATION BY QUEST. Quest agrees to defend, indemnify and hold
harmless SB, its Affiliates, and their respective officers, directors,
employees, stockholders, agents and representatives from claims,
demands, costs, expenses (including reasonable attorney's fees) and
liabilities or losses (collectively, "LOSSES") which may be asserted
against or incurred by SB, its Affiliates, and their respective
officers, directors, employees, stockholders, agents and
representatives, caused or alleged to be caused by Quest, or its
respective Affiliates, officers, directors, employees, agents or
representatives in providing Services under the terms of the Agreement;
PROVIDED, HOWEVER, that Quest shall have no liability under this
Section XXII(1) to the extent such Loss arises solely as a result of
any negligent, improper or illegal act or failure to act on the part of
SB, its Affiliates or their respective officers, directors, employees,
stockholders, agents, or representatives.
2 INDEMNIFICATION BY SB. SB agrees to defend, indemnify and hold harmless
Quest, its respective Affiliates, officers, directors, employees,
stockholders, agents and representatives from any and all Losses which
may be asserted against Quest, its respective Affiliates, officers,
directors, employees, stockholders, agents and representatives which
result from or arise out of (i) the manufacture, distribution, sale or
use in any manner of the pharmaceutical compound being tested by Quest,
or (ii) the conduct of clinical trials by SB, its Affiliates, or their
respective officers, directors, employees, agents or representatives;
PROVIDED, HOWEVER, that SB shall not have any liability under this
Section XXII(2) to the extent such Loss arises solely as a result of
any negligent, improper or illegal act or failure to act on the part of
Quest, or its respective Affiliates, officers, directors, employees,
stockholders, agents, or representatives.
3 LIMITATIONS ON QUEST'S LIABILITY. Notwithstanding Sections XXII (1),
the liability of Quest under this Agreement shall be no greater than:
(i) in the case where Quest's breach has not rendered a Study
invalid, a reduction in the total contract price for the Study
in an amount equal to the difference between (a) the total
contract price for the Study and (b) the value of the work
properly performed; and
(ii) in the case where Quest's breach renders a Study invalid, a
refund of the total contract price paid by SB or an SB
Subsidiary to Quest, plus the difference in such contract
price and any additional, commercially reasonable amounts that
SB or an SB Subsidiary must incur to have the
<PAGE>
Study performed over; provided, however, that any Study that
SB shall have performed over shall be performed using similar
standards that were required by SB or an SB Subsidiary of
Quest initially for the Study. In such a situation where
Quest's breach renders a Study invalid, SB or the SB
Subsidiary shall have the option to have Quest re-perform the
Study at no additional expense to SB or the SB Subsidiary or,
alternatively, to have a clinical laboratory other than Quest
perform the Study. If SB or the SB Subsidiary elects to have
another laboratory perform the Study, SB and the SB Subsidiary
shall be released from the obligations under Section II to use
Quest on an exclusive basis, but only for the particular Study
that was invalidated by Quest's breach.
UNDER NO CIRCUMSTANCES SHALL SB BE ENTITILED TO, NOR SHALL QUEST BE
RESPONSIBLE FOR, ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL
DAMAGES (INCLUDING, WITHOUT LIMITATION, LOST PROFITS) ARISING AS A
RESULT OF OR IN CONNECTION WITH QUEST'S DEFAULT OR BREACH OF ITS
OBLIGATIONS UNDER THIS AGREEMENT OR ANY GIVEN STUDY, OR ANY DOCUMENTS
RELATED THERETO.
4. LIMITATION ON SB'S LIABILITY. Notwithstanding Section XXII (2), should
SB terminate this Agreement as a result of the repeated and continued
failure of Quest to provide Services in accordance with the generally
accepted quality standards in the clinical trials laboratory testing
industry, which failure does not rise to the level of a Material Breach
under section XXI (1), the liability of SB under this Agreement,
including any liability for incidental, indirect, consequential or
special damages, including, without limitation, lost profits of Quest,
shall be no greater than $ 30 million.
5 PROCEDURES RELATING TO INDEMNIFICATION OF THIRD PARTY CLAIMS. In order
for a party (the "INDEMNIFIED PARTY") to be entitled to any
indemnification provided for under this Agreement in respect of,
arising out of or involving a claim or demand made by any Person
against the indemnified party (a "THIRD PARTY CLAIM"), such indemnified
party must notify the indemnifying party in writing, and in reasonable
detail, of the Third Party Claim within 15 business days after receipt
by such indemnified party of written notice of the Third Party Claim;
PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of
such failure (except that the indemnifying party shall not be liable
for any expenses incurred during the period in which the indemnified
party failed to give such notice). Thereafter, the indemnified party
shall deliver to the indemnifying party, within five business days
after the indemnified party's
<PAGE>
receipt thereof, copies of all notices and documents (including court
papers) received by the indemnified party relating to the Third Party
Claim.
If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense
thereof and, if it so chooses and acknowledges its obligation to
indemnify the indemnified party therefor, to assume the defense thereof
with counsel selected by the indemnifying party; 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. If the indemnifying party
assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the indemnifying party,
it being understood that the indemnifying party shall control such
defense. The indemnifying party shall be liable for the fees and
expenses of counsel employed by the indemnified party for any period
during which the indemnifying party has failed to assume the defense
thereof (other than during the period prior to the time the indemnified
party shall have given notice of the Third Party Claim as provided
above).
If the indemnifying party so elects to assume the defense of any Third
Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or 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.
The indemnification required by this Section XXII shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or loss,
liability, claim, damage or
<PAGE>
expense is incurred. All claims under this Section XXII other than
Third Party Claims shall be governed by Section XXII(6).
6 PROCEDURES RELATING TO OTHER CLAIMS. In the event any indemnified party
should have a claim against any indemnifying party under this Section
XXII that does not involve a Third Party Claim being asserted against
or sought to be collected from such indemnified party, the indemnified
party shall deliver notice of such claim with reasonable promptness to
the indemnifying party. The failure by any indemnified party to so
notify the indemnifying party shall not relieve the indemnifying party
from any liability which it may have to such indemnified party under
this Section XXII, except to the extent that the indemnifying party
demonstrates that it has been materially prejudiced by such failure. If
the indemnifying party does not notify the indemnified party within 30
calendar days following its receipt of such notice that the
indemnifying party disputes its liability to the indemnified party
under this Section XXII, such claim specified by the indemnified party
in such notice shall be conclusively deemed a liability of the
indemnifying party under this Section XXII 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.
SECTION XXIII. ASSIGNABILITY AND AMENDMENTS
1 This Agreement and the rights and obligations hereunder shall not be
assignable in whole or in part by any party without the prior written
consent of the other parties hereto (such consent not to be
unreasonably withheld or delayed); PROVIDED, HOWEVER, that (i) subject
to clause (ii) below, any party may assign its rights and obligations,
in whole or in part, to an Affiliate of such party which (a) is
Controlled by such party and (b) agrees in writing to be bound by the
terms of this Agreement (including clause (ii) below); provided,
however, that if SB assigns this Agreement to an Affiliate, the
Agreement will continue to be applicable to SB and the SB Subsidiaries,
and (ii) upon such assignee ceasing to be an Affiliate of such party or
an Affiliate Controlled by such party, such rights and obligations must
be assigned back to such party or to another permitted assignee of such
party and, in any event, the parties hereto agree that the original
assignment shall have no further force and effect. Any transaction or
series of transactions by which Quest or any of its respective
Affiliates transfers,
<PAGE>
directly or indirectly, responsibility for, control of, or ownership
of, the operations of Quest's clinical trials business, or other
business division or Quest Affiliate providing Services pursuant to
this Agreement, to a third party, including through a management
contract, a sale of assets, a business combination, liquidation,
dissolution, merger or other transaction, shall constitute an
assignment requiring SB's prior written consent (such consent not to be
unreasonably withheld or delayed). Should SB withhold its consent to
any transfer by Quest described above, and Quest elects to continue
with such transfer, SB shall have the right to immediately terminate
this Agreement. Any attempted assignment in violation of this Section
XXIII shall be void.
2 No amendment, modification or waiver of this Agreement shall be
effective unless it shall be in writing and signed by all the parties
hereto.
SECTION XXIV. CHANGE IN CONTROL OF SB
1. In the event of a Change in Control of SB, the successor company to SB
as a result of such Change in Control (the "Successor Company") shall
be required to conduct Studies under this Agreement for any
pharmaceutical compound which immediately prior to the date of such
Change in Control (the "Change of Control Date") (i) SB or any SB
Subsidiary owns or has interests in, or (ii) is in development by SB or
any SB Subsidiary (the "Existing SB Compounds"), in each case to the
extent such Studies are required by the terms of Section II; provided,
however, that, in any event, the Successor Company shall be required to
continue to conduct Studies under this Agreement such that on an annual
basis the revenues paid to Quest are at or above the Annual Minimum, as
defined below in Section XXIV(2). One month following each anniversary
following the Change of Control Date, Quest will bill SB, and SB shall
pay to Quest the Annual Minimum, less the revenues actually billed by
Quest and paid by SB in the twelve months prior to such anniversary.
2. The "Annual Minimum" for a twelve-month period shall be defined and
determined as follows:
(i) an amount equal to the average of the revenues actually paid
by SB to Quest in the three years preceding the Change of
Control Date for Services under this Agreement (or, in the
event that the Change of Control Date is less than three years
after the date hereof, the intercompany transfers between SB
and SmithKline Beecham Clinical Laboratories, Inc. for such
services shall be deemed to be revenues)(the "Initial
Minimum"); plus
(ii) for the first twelve month period, an increase of 10% over the
Initial Minimum; or
<PAGE>
(iii) for subsequent twelve month periods, an increase of 10% over
the calculated prior Annual Minimum.
3. For the avoidance of doubt and notwithstanding the foregoing, in the
event of a Change in Control of SB, no Successor Company or any Person
which otherwise becomes an Affiliate of SB as a result of such Change
in Control shall be required to conduct any Studies under this
Agreement except with respect to Existing SB Compounds.
SECTION XXV. GOVERNING LAW
This Agreement shall be construed, interpreted and enforced under the laws of
the State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
SECTION XXVI. INTERPRETATION
1 The headings contained in this Agreement, in any Exhibit hereto, in any
Addendum executed pursuant to this Agreement and in the table of
contents to this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
All Exhibits annexed hereto or referred to herein and all Addenda
executed pursuant to this Agreement are hereby incorporated in and made
a part of this Agreement as if set forth in full herein (E.G., any
requirement for Quest to perform Services for any Study "pursuant to
the terms set forth in this Agreement," is a requirement to perform
such Services as set forth in the terms included in all Sections of
this Agreement, in the relevant Addendum (including the relevant CLW)
and in any Exhibit or Schedule to this Agreement). Any capitalized
terms used in any Exhibit or Addendum but not otherwise defined
therein, shall have the meanings set forth in this Agreement.
2 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". Unless the context requires
otherwise (A) 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
<PAGE>
modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (B) any reference herein to any
Person shall be construed to include the Person's successors and
permitted assigns, (C) 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 (D) all references herein to paragraphs, Sections, Exhibits, or
Addenda shall be construed to refer to paragraphs, Sections, Exhibits,
Schedules and Addenda of this Agreement.
3 All references to Quest's laboratory in the United Kingdom are hereby
deemed to be references to any replacement laboratory Quest may
establish in the future.
SECTION XXVII. ENFORCEMENT
1 Each party irrevocably submits to the exclusive jurisdiction of (i) any
Federal court located in the State of New Jersey and (ii) any New
Jersey state court, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction
contemplated hereby. Each party agrees to commence any action, suit or
proceeding relating hereto either in a Federal Court located in the
State of New Jersey or in a New Jersey state court. Each party further
agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's address as listed in Section XXVIII
shall constitute effective service of process for any action, suit or
proceeding in New Jersey with respect to any matters to which it has
submitted to jurisdiction in this Section XXVII. Each party irrevocably
and unconditionally waives any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (i) any Federal court located in
the State of New Jersey or (ii) any New Jersey state court, 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.
2 Each party hereby waives to the fullest extent permitted by applicable
law, any right it may have to a trial by jury in respect to any
litigation directly or indirectly arising out of, under or in
connection with this Agreement or any transaction contemplated hereby.
Each party (i) 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, seeks to enforce
that foregoing waiver and (ii) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement by, among
other things, the mutual waivers and certifications in this Section
XXVII.
<PAGE>
SECTION XXVIII. NOTICES
All notices permitted or required to be given under the terms of this Agreement
shall be deemed to have been given when sent by telex or facsimile followed by
letter to the respective addresses of each party as indicated as set forth below
(or any new addresses with which as either party may provide the other party in
writing from time to time):
If to Quest: Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, NJ 07608-1070
Attn: Vice President of Sales
With a required copy to:
Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, NJ 07608-1070
Attn: General Counsel
201-393-5370
201-393-5289 (fax)
<PAGE>
If to SB: SmithKline Beecham Pharmaceuticals
Research and Development
709 Swedeland Road, UM2326
King of Prussia, PA 19406
Attn: William Claypool, M.D.
Senior Vice President and Director
Clinical Research and Development
and
SmithKline Beecham Pharmaceuticals
Research and Development
New Frontiers Science Park
The Pinnacles
Harlow, Essex CM 19 5AW
U.K.
Attn: Lynda Waltham, Ph.D.
Director
Clinical Development Contract Management
With a required copy to:
SmithKline Beecham Corporation
Corporate Law Department
One Franklin Plaza
200 N. 16th Street
Philadelphia, PA 19101
Attn: General Counsel-U.S.
215-751-5055
215-751-4184 (fax)
SECTION XXIX. TERMINATION OF EXISTING AGREEMENT
SB shall terminate the Global Service Level Agreement for Clinical Trials
Laboratory Testing and Services dated January 8, 1999, such that upon the date
of this Agreement, this Agreement shall constitute the entire agreement between
Quest and SB regarding the subject matter hereof.
[Signatures continue on next page]
<PAGE>
IN WITNESS WHEREOF, SB and Quest have duly executed this
Global Clinical Trials Agreement on the first day above written.
SMITHKLINE BEECHAM PLC
By /s/ Donald F. Parman
---------------------------------
Name: Donald F. Parman
Title: Authorized Signatory
By
---------------------------------
Name:
Title:
QUEST DIAGNOSTICS INCORPORATED
By /s/ Kenneth W. Freeman
---------------------------------
Name: Kenneth W. Freeman
Title: Chief Executive Officer
By
---------------------------------
Name:
Title:
<PAGE>
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EXHIBIT 11
QUEST DIAGNOSTICS INCORPORATED,
as Borrower,
and
THE GUARANTORS PARTY HERETO
----------------------
$1,575,000,000
CREDIT AGREEMENT
Dated as of August 16, 1999
----------------------
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Joint Lead Arranger and Syndication Agent,
and
BANC OF AMERICA SECURITIES LLC,
as Joint Lead Arranger,
and
BANK OF AMERICA, N.A.,
as Administrative Agent,
and
WACHOVIA BANK, N.A.,
as Co-Documentation Agent,
THE BANK OF NEW YORK,
as Co-Documentation Agent,
and
THE LENDERS PARTY HERETO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which
it is attached but is inserted for convenience of reference only.
<TABLE>
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Section 1. Definitions, Accounting Matters and Rules of Construction............ 1
1.01. Certain Defined Terms................................................ 1
1.02. Accounting Terms and Determinations.................................. 38
1.03. Classes and Types of Loans........................................... 39
1.04. Rules of Construction................................................ 39
Section 2. Commitments, Letters of Credit, Conversions and Continuations,
Fees, Register, Prepayments and Replacement of Lenders............ 40
2.01. Loans................................................................ 40
2.02. Borrowings........................................................... 42
2.03. Letters of Credit.................................................... 43
2.04. Termination and Reductions of Commitments............................ 48
2.05. Fees................................................................. 49
2.06. Lending Offices...................................................... 50
2.07. Several Obligations of Lenders....................................... 50
2.08. Notes; Register...................................................... 50
2.09. Optional Prepayments and Conversions or Continuations of Loans....... 51
2.10. Mandatory Prepayment and Commitment Reductions....................... 52
2.11. Replacement of Lenders............................................... 57
2.12. Defaulting Lenders................................................... 58
Section 3. Payments of Principal and Interest................................... 61
3.01. Repayment of Loans................................................... 61
3.02. Interest............................................................. 61
Section 4. Payments; Pro Rata Treatment; Computations; Etc...................... 62
4.01. Payments............................................................. 62
4.02. Pro Rata Treatment................................................... 63
4.03. Computations......................................................... 64
4.04. Minimum Amounts...................................................... 64
4.05. Certain Notices...................................................... 64
4.06. Non-Receipt of Funds by Administrative Agent......................... 65
4.07. Right of Setoff; Sharing of Payments; Etc............................ 66
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Section 5. Yield Protection, Etc................................................ 68
5.01. Additional Costs..................................................... 68
5.02. Inability to Determine Interest Rate................................. 69
5.03. Illegality........................................................... 70
5.04. Treatment of Affected Loans.......................................... 70
5.05. Compensation......................................................... 71
5.06. Net Payments......................................................... 71
5.07. Limitations on Obligations of Borrower............................... 74
Section 6. Guarantee............................................................ 75
6.01. The Guarantee........................................................ 75
6.02. Obligations Unconditional............................................ 75
6.03. Reinstatement........................................................ 77
6.04. Subrogation; Subordination........................................... 77
6.05. Remedies............................................................. 77
6.06. Instrument for the Payment of Money.................................. 78
6.07. Continuing Guarantee................................................. 78
6.08. General Limitation on Guarantee Obligations.......................... 78
Section 7. Conditions Precedent................................................. 78
7.01. Conditions to Effectiveness.......................................... 78
7.02. Conditions to Initial Extension of Credit............................ 79
7.03 Conditions to Initial and Subsequent Extensions of Credit............ 85
7.04. Determinations Under Section 7....................................... 86
Section 8. Representations and Warranties....................................... 86
8.01. Corporate Existence.................................................. 87
8.02. Financial Condition; Etc............................................. 87
8.03. Litigation........................................................... 88
8.04. No Breach; No Default................................................ 88
8.05. Action............................................................... 89
8.06. Approvals............................................................ 89
8.07. [Reserved]........................................................... 89
8.08. ERISA................................................................ 90
8.09. Taxes................................................................ 90
8.10. Investment Company Act; Public Utility Holding Company Act;
Other Restrictions................................................ 90
8.11. Environmental Matters................................................ 91
8.12. [Reserved]........................................................... 91
8.13. Use of Proceeds...................................................... 91
8.14. Subsidiaries, Etc.................................................... 92
8.15. Ownership of Property; Liens......................................... 92
</TABLE>
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8.16. Security Interest; Absence of Financing Statements; Etc.............. 92
8.17. Licenses and Permits; Compliance with Laws........................... 93
8.18. True and Complete Disclosure; Exchange Act Filings................... 93
8.19. Solvency............................................................. 93
8.20. Contracts............................................................ 94
8.21. Labor Matters........................................................ 94
8.22. Subordinated Debt.................................................... 94
8.23. Year 2000............................................................ 94
8.24. Intellectual Property................................................ 94
8.25. Existing Indebtedness................................................ 95
Section 9. Covenants............................................................ 95
9.01. Financial Statements, Etc............................................ 95
9.02. Litigation, Etc...................................................... 99
9.03. Existence; Compliance with Law; Payment of Taxes; Inspection
Rights; Performance of Obligations; Etc........................... 99
9.04. Insurance............................................................ 100
9.05. Limitation on Lines of Business...................................... 100
9.06. Limitation on Fundamental Changes, Acquisitions or Dispositions...... 101
9.07. Limitation on Liens and Negative Pledges............................. 105
9.08. Prohibition on Disqualified Capital Stock; Limitation on
Indebtedness and Contingent Obligations; Limitation on
Designated Senior Indebtedness.................................... 107
9.09. Limitation on Investments; Limitation on Creation of Subsidiaries.... 110
9.10. Limitation on Dividend Payments...................................... 114
9.11. Financial Covenants.................................................. 115
9.12. Equal Security for Loans and Notes; Pledge or Mortgage of Real
Property; Landlord Consents....................................... 117
9.13. Security Interests; Further Assurances............................... 118
9.14. Compliance with Environmental Laws................................... 118
9.15. Limitation on Transactions with Affiliates and Related Persons....... 119
9.16. Limitation on Accounting Changes; Limitation on Investment
Company Status.................................................... 120
9.17. Limitation on Modifications of Certain Documents, Etc................ 120
9.18. Interest Rate Protection Agreements.................................. 120
9.19. Limitation on Certain Restrictions Affecting Subsidiaries............ 120
9.20. Additional Obligors.................................................. 121
9.21. Limitation on Payments or Prepayments of Indebtedness or
Modification of Deb Documents..................................... 122
9.22. Year 2000 Compliance................................................. 123
</TABLE>
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Section 10. Events of Default.................................................... 123
Section 11. Agents............................................................... 128
11.01. General Provisions................................................... 128
11.02. Indemnification...................................................... 130
11.03. Consents Under Other Credit Documents................................ 131
11.04. Collateral Sub-Agents................................................ 131
Section 12. Miscellaneous........................................................ 131
12.01. Waiver............................................................... 131
12.02. Notices.............................................................. 132
12.03. Expenses, Indemnification, Etc....................................... 132
12.04. Amendments, Etc...................................................... 134
12.05. Successors and Assigns............................................... 139
12.06. Assignments and Participations....................................... 139
12.07. Survival............................................................. 141
12.08. Captions............................................................. 141
12.09. Counterparts; Interpretation; Effectiveness.......................... 142
12.10. Governing Law; Submission to Jurisdiction; Waivers; Etc.............. 142
12.11. Confidentiality...................................................... 143
12.12. Independence of Representations, Warranties and Covenants............ 143
12.13. Severability......................................................... 143
Signatures.......................................................................... S-1
</TABLE>
<TABLE>
<S> <C>
ANNEX A - Commitments
ANNEX B - Terms of Receivables Transaction
SCHEDULE 1.01(a) - Applicable Margins Before Trigger Date
SCHEDULE 1.01(b) - Applicable Margins After Trigger Date
SCHEDULE 1.01(c) - Applicable R/C Fee Percentage
SCHEDULE 1.01(d) - Guarantors
SCHEDULE 1.01(e) - Excluded Subsidiaries at Effective Date
SCHEDULE 1.01(f) - Qualified Joint Ventures
SCHEDULE 1.01(g) - Contemplated Acquisitions
SCHEDULE 1.01(h) - Contemplated Dispositions
SCHEDULE 1.01(i) - Contemplated Investments
SCHEDULE 1.01(j) - Mortgaged Real Property at Closing Date
SCHEDULE 2.03(l) - Existing Letters of Credit
SCHEDULE 3.01(b) - Amortization Schedule
SCHEDULE 7.02(xviii) - Mortgaged Real Property Matters at Closing Date
SCHEDULE 8.02(C) - Certain Contingent Obligations
SCHEDULE 8.03 - Litigation
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
SCHEDULE 8.09 - Tax Matters
SCHEDULE 8.11 - Environmental Matters
SCHEDULE 8.14 - Subsidiaries, Etc.
SCHEDULE 8.16 - Security Interests
SCHEDULE 8.21 - Labor Matters
SCHEDULE 8.24 - Intellectual Property Matters
SCHEDULE 8.25(A) - Indebtedness Outstanding as of the Effective Date
SCHEDULE 8.25(B) - Certain Indebtedness to Remain Outstanding After the
Closing Date
SCHEDULE 9.07 - Certain Existing Liens
SCHEDULE 9.09 - Investments
SCHEDULE 9.12 - Mortgaged Real Property Matters After Closing Date
SCHEDULE 9.15 - Existing Affiliate Agreements
SCHEDULE 9.19 - Certain Restrictions Applicable to Subsidiaries
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Term A Facility Note
EXHIBIT A-3 - Form of Term B Facility Note
EXHIBIT A-4 - Form of Term C Facility Note
EXHIBIT A-5 - Form of Capital Markets Facility Note
EXHIBIT A-6 - Form of Swing Loan Note
EXHIBIT B - Terms of Subordination Provision
EXHIBIT C-1 - Form of Interest Rate Certificate
EXHIBIT C-2 - Form of Solvency Certificate
EXHIBIT D - Form of Security Agreement
EXHIBIT E-1 - Form of Opinion of Raymond C. Marier, Vice President
and Senior Counsel of Borrower
EXHIBIT E-2 - Form of Opinion of Counsel to the Obligors
EXHIBIT F - Form of Notice of Assignment
EXHIBIT G - Form of Notice of Borrowing
EXHIBIT H - Form of Notice of Conversion/Continuation
EXHIBIT I - Form of Joinder Agreement
EXHIBIT J - Form of Foreign Lender Certificate
EXHIBIT K - [Reserved]
EXHIBIT L - Form of Assignment Agreement
EXHIBIT M - Form of Perfection Certificate
</TABLE>
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<PAGE>
CREDIT AGREEMENT dated as of August 16, 1999, among QUEST DIAGNOSTICS
INCORPORATED, as Borrower; the Guarantors party hereto; each of the lenders that
is a signatory hereto identified under the caption "LENDERS" on the signature
pages hereto or that, pursuant to Section 12.06(b), shall become a "Lender"
hereunder (individually, a "LENDER" and, collectively, the "LENDERS"); MERRILL
LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MERRILL
LYNCH"), as joint lead arranger; BANC OF AMERICA SECURITIES LLC ("BAS"), as
joint lead arranger (in such capacity, together with its successors and Merrill
Lynch together with its successors in its capacity as joint lead arranger, the
"JOINT LEAD ARRANGERS"); BANK OF AMERICA, N.A. ("BANK OF AMERICA"), as
administrative agent (in such capacity, together with its successors in such
capacity, the "ADMINISTRATIVE AGENT"); WACHOVIA BANK, N.A. ("WACHOVIA"), as
co-documentation agent; THE BANK OF NEW YORK, as co-documentation agent (in such
capacity, together with Wachovia as co-documentation agent, the
"CO-DOCUMENTATION AGENTS"); and MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED, as syndication agent (in such capacity, together
with its successors in such capacity, the "SYNDICATION AGENT").
The parties hereto agree as follows:
Section 1. DEFINITIONS, ACCOUNTING MATTERS AND RULES OF CONSTRUCTION.
1.01. CERTAIN DEFINED TERMS. As used herein, the following terms shall
have the following meanings:
"ABR LOANS" shall mean Loans that bear interest at rates based upon the
Alternate Base Rate.
"ACCOUNT" shall mean any account (as that term is defined in Section
9-106 of the UCC) of any Company arising from the sale or lease of goods or
rendering of services.
"ACQUISITION" shall mean, with respect to any Person, any transaction
or series of related transactions for the direct or indirect (a) acquisition of
all or substantially all of the Property of any other Person, or of any business
or division of any other Person, (b) acquisition of more than 50% of the Equity
Interests of any other Person, or otherwise causing any other Person to become a
Subsidiary of such Person, or (c) merger or consolidation or any other
combination with any other Person.
"ACQUISITION CONSIDERATION" shall mean the purchase consideration for
any Acquisition and all other payments made and Indebtedness incurred by any
Company in exchange for, or as part of the purchase price for, any Acquisition,
whether paid in cash or by exchange of Equity Interests or of Property or
otherwise and whether payable at or prior to the consummation of such
Acquisition or deferred for payment at any future time, whether or not any such
future payment is subject to the occurrence of any contingency, and includes any
and all payments and liabilities representing the purchase price and any
assumption of Indebtedness, "earn-outs" and other Profit Payment Agreements (if,
and when, paid) and non-competition agreements.
<PAGE>
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"ADJUSTED NET INCOME" shall mean, for any period, Consolidated Net
Income for such period, adjusted by excluding (to the extent taken into account
in the calculation of such Consolidated Net Income) the effect of (a) gains or
losses for such period from Excluded Dispositions and Dispositions not in the
ordinary course of business, and the tax consequences thereof, (b) any
non-recurring or extraordinary items of income (other than the proceeds of
business interruption insurance) or expense, including transaction and
integration expenses related to the SBCL Acquisition (the cash amount related to
the SBCL Acquisition being limited to an aggregate pre-tax amount of $300.0
million (it being understood that the write-down of accounts receivable in
connection with the SBCL Acquisition are not cash expenses)) for such period and
the tax consequences thereof, (c) the net income of any Subsidiary to the extent
that the declaration or payment of dividends or similar distribution by such
Subsidiary was not for the relevant period permitted, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Subsidiary or its
stockholders, and (d) non-cash charges associated with the issuance by Borrower
of its Equity Interests or Equity Rights to employees of any Company.
"ADMINISTRATIVE AGENT" see the introduction hereto.
"ADVANCE DATE" see Section 4.06.
"AFFILIATE" shall mean, with respect to any Person, any other Person
which directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "CONTROL" (including,
with its correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"AFFILIATE TRANSACTION" see Section 9.15.
"AGENT" shall mean any of Administrative Agent, either Co-Documentation
Agent, either Joint Lead Arranger or Syndication Agent.
"AGREEMENT" shall mean this Credit Agreement, as amended from time to
time.
"ALTERNATE BASE RATE" shall mean for any day, the higher of (a) the
Prime Rate announced by Administrative Agent from time to time, changing when
said Prime Rate changes, and (b) the Federal Funds Rate plus 0.50% PER ANNUM.
Any change in the Alternate Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such change.
"AMORTIZATION PAYMENT" shall mean each scheduled installment of
payments on the Term Loans as set forth in Section 3.01(b).
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an Affiliate of such
Lender) designated for such type of Loan on the signature pages hereof or such
other office of such Lender (or of an Affiliate of such
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Lender) as such Lender may from time to time specify to Administrative Agent and
Borrower as the office by which its Loans of such Type are to be made and
maintained.
"APPLICABLE MARGIN" shall be, for any Type and Class of Loan, (A) prior
to the Trigger Date (as defined below), the percentage PER ANNUM set forth on
SCHEDULE 1.01(A) for such Type and Class of Loan, and (B) on and after the date
(the "TRIGGER DATE") which is the later of (a) the date of repayment in full of
the Capital Markets Facility and (b) the first date after the Closing Date on
which Borrower has delivered to the Lenders the financial statements and an
Interest Rate Certificate required by Sections 9.01(a), (b) and (e) and an
Officers' Certificate demonstrating the then applicable Total Leverage Ratio for
a fiscal quarter ended at least six months after the Closing Date, the
Applicable Margin shall be the percentage PER ANNUM set forth on SCHEDULE
1.01(B) for such Type and Class of Loan set forth opposite the relevant Total
Leverage Ratio in each Schedule as evidenced in the most recent Interest Rate
Certificate delivered hereunder. After the Trigger Date, any change in the Total
Leverage Ratio shall be effective to adjust the Applicable Margin as of the date
of receipt by Administrative Agent of the Interest Rate Certificate most
recently delivered pursuant to Section 9.01(e). If Borrower fails to deliver the
financial statements or Interest Rate Certificate within the times specified in
Sections 9.01(a), (b) and (e), the Total Leverage Ratio shall be deemed to be
greater than or equal to 4.25:1.0 from the date of any such failure to deliver
until Borrower delivers such Interest Rate Certificate and financial statements.
"APPLICABLE R/C FEE PERCENTAGE" shall mean 0.50% PER ANNUM; PROVIDED,
HOWEVER, that on and after the Trigger Date, when the Total Leverage Ratio (as
evidenced in the most recently delivered Interest Rate Certificate) at the end
of the most recently ended fiscal quarter is as set forth in SCHEDULE 1.01(C),
the Applicable R/C Fee Percentage shall mean the percentage PER ANNUM set forth
opposite such Total Leverage Ratio in SCHEDULE 1.01(C). Any change in the Total
Leverage Ratio shall be effective to adjust the Applicable R/C Fee Percentage as
of the date of receipt by Administrative Agent of the Interest Rate Certificate
most recently delivered pursuant to Section 9.01(e). If Borrower fails to
deliver the financial statements and Interest Rate Certificate within the times
specified in Sections 9.01(a), (b) and (e), the Total Leverage Ratio shall be
deemed to be greater than or equal to 4.25:1.0 from the date of any such failure
to deliver until Borrower delivers such Interest Rate Certificate and financial
statements.
"APPROVED FUND" shall mean, with respect to any Lender that is a fund
or commingled investment vehicle that invests in loans, any other fund that
invests in loans and is managed or advised by the same investment advisor as
such Lender or by an Affiliate of such investment advisor.
"BANKRUPTCY CODE" shall mean the United States Federal Bankruptcy Code
of 1978, as amended or supplemented.
"BAS" see the introduction to this Agreement.
"BORROWER" shall mean Quest Diagnostics Incorporated, a Delaware
corporation.
"BUSINESS DAY" shall mean any day, except a Saturday or Sunday, (a) on
which commercial banks are not authorized or required to close in New York City
and Charlotte, North Carolina
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and (b) if such day relates to a borrowing of, a payment or prepayment of
principal of or interest on, a Continuation or Conversion of or into, or an
Interest Period for, a LIBOR Loan or a notice by Borrower with respect to any
such borrowing, payment, prepayment, Continuation, Conversion or Interest
Period, that is also a day on which dealings in Dollar deposits are carried out
in the London interbank market. Administrative Agent will notify Borrower of any
such day that is a Business Day in North Carolina but not in New York to the
extent Administrative Agent has knowledge of the same.
"CAPITAL EXPENDITURES" shall mean, for any period, any direct or
indirect (by way of acquisition of securities of a Person or the expenditure of
cash or the transfer of Property or the incurrence of Indebtedness) expenditures
in respect of the purchase or other acquisition of fixed or capital assets
determined in conformity with GAAP, excluding (a) normal replacement and
maintenance programs properly charged to current operations, (b) any expenditure
made with the Net Available Proceeds of any Equity Issuance or Disposition Event
to the extent such Net Available Proceeds are not required to be applied to the
prepayment of the Loans in accordance with Sections 2.10(a)(ii) or 2.10(a)(iv),
(c) any expenditure made in an amount not exceeding the proceeds of any Excluded
Disposition (other than sales of inventory in the ordinary course of business),
(d) expenditures in an amount not to exceed the sum of (x) the Net Available
Proceeds of any Casualty Event to the extent such Net Available Proceeds are not
required to be applied to the prepayment of the Loans in accordance with Section
2.10(a)(i) and (y) the amount of any applicable insurance deductibles with
respect to such Casualty Event to the extent such amount is applied as set forth
in clause (x) of Section 2.10(a)(i) within the period specified therein, (e)
expenditures to effect Permitted Acquisitions to the extent permitted by
Sections 9.06 and 9.09, and (f) the purchase price of equipment to the extent
that the consideration therefor consists of used or surplus equipment being
traded in at such time or the proceeds of a concurrent sale of such used or
surplus equipment.
"CAPITAL LEASE," as applied to any Person, shall mean any lease of any
Property by that Person as lessee which, in conformity with GAAP, is required to
be classified and accounted for as a capital lease on the balance sheet of that
Person.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all obligations
of such Person to pay rent or other amounts under a Capital Lease, and, for
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
"CAPITAL MARKETS FACILITY" shall mean the credit facility comprising
the Capital Markets Facility Commitments and Capital Markets Facility Loans.
"CAPITAL MARKETS FACILITY COMMITMENT" shall mean, for each Capital
Markets Facility Lender, the obligation of such Lender to make a Capital Markets
Facility Loan in an amount up to but not exceeding the amount set opposite the
name of such Lender on ANNEX A under the caption "Capital Markets Facility
Commitment" (as the same may be changed pursuant to Section 12.06(b)). The
initial aggregate principal amount of the sum of the Capital Market Facility
Commitments of all Lenders is $300.0 million.
"CAPITAL MARKETS FACILITY LENDERS" shall mean (a) on the date hereof,
the Lenders having Capital Markets Facility Commitments on the signature pages
hereof, and (b) thereafter, the
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Lenders from time to time holding Capital Markets Facility Loans and Capital
Markets Facility Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b).
"CAPITAL MARKETS FACILITY LOANS" see Section 2.01(b).
"CAPITAL MARKETS FACILITY NOTES" shall mean the promissory notes
substantially in the form of EXHIBIT A-5.
"CASH EQUIVALENTS" shall mean, for any Person: (a) direct obligations
of the United States of America, or of any agency thereof, or obligations
guaranteed as to principal and interest by the United States of America, or by
any agency thereof, in either case maturing not more than thirteen months from
the date of acquisition thereof by such Person; (b) time deposits, certificates
of deposit or bankers' acceptances (including eurodollar deposits) issued by any
Lender or any other bank or trust company organized under the laws of the United
States of America or any state thereof and having capital, surplus and undivided
profits of at least $500.0 million and a deposit rating of investment grade; (c)
commercial paper rated or master notes issued or guaranteed by an entity rated
A-1 or better by S&P or P-1 or better by Moody's, respectively, maturing not
more than 180 days from the date of acquisition thereof by such Person; (d)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (a) above entered into with a bank
meeting the qualifications described in clause (b) above; (e) securities with
maturities of six months or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least A by S&P or A by Moody's; or (f) money market mutual funds or bond
funds that invest primarily in the foregoing items.
"CASUALTY EVENT" shall mean, with respect to any Property of any
Person, any loss of title with respect to Real Property, or any loss of or
damage to or destruction of, or any condemnation or other taking (including by
any Governmental Authority) of, such Property for which such Person or any of
its Subsidiaries receives insurance proceeds or proceeds of a condemnation award
or other compensation; PROVIDED, HOWEVER, no such event shall constitute a
Casualty Event if (x) such proceeds or other compensation in respect thereof is
less than $5.0 million and (y) all such proceeds and other compensation in
respect of all such events since the Effective Date is less than $20.0 million.
"CASUALTY EVENT" shall include but not be limited to any taking of all or any
part of any Real Property of any Company, in or by condemnation or other eminent
domain proceedings pursuant to any Law, or by reason of the temporary
requisition of the use or occupancy of all or any part of any Real Property of
any Company by any Governmental Authority, civil or military.
"CERCLA" see Section 8.11.
"CHANGE OF CONTROL" shall mean any transaction or event occurring on or
after the date hereof as a direct or indirect result of which (a) any Person or
any group shall (i) beneficially own (directly or indirectly) in the aggregate
Equity Interests of Borrower having 35% or more of the aggregate voting power of
all Equity Interests of Borrower at the time outstanding or (ii) have the right
or power to appoint a majority of the board of directors of Borrower; or (b)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the board of
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directors of Borrower (together with any new directors whose election by such
board of directors or whose nomination for election by the shareholders of
Borrower was approved by a vote of a majority of the directors of Borrower then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute at least a majority of the board of directors of
Borrower then in office. For purposes of this definition, the terms
"BENEFICIALLY OWN" and "GROUP" shall have the respective meanings ascribed to
them pursuant to Section 13(d) of the Exchange Act, except that a Person or
group shall be deemed to "beneficially own" all securities that such Person or
group has the right to acquire, whether such right is exercisable immediately or
only after the passage of time.
"CLASS" see Section 1.03.
"CLOSING DATE" see Section 7.02.
"CODE" shall mean the United States Internal Revenue Code of 1986, as
amended.
"CO-DOCUMENTATION AGENTS" see the introduction hereto.
"COLLATERAL" shall mean all of the Pledged Collateral, the Mortgaged
Property (as defined in each Mortgage) and any other Property, whether now owned
or hereafter acquired, upon which a Lien securing the Obligations is granted or
to be granted in accordance with the terms hereof under any Security Document.
"COLLATERAL ACCOUNT" see Section 9(d) of the Security Agreement.
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"COMMITMENT LETTER" shall mean the Credit Facilities Commitment Letter
among Merrill Lynch Capital Corporation, BAS (f/k/a NationsBanc Montgomery
Securities LLC), Bank of America (f/k/a NationsBank, N.A.) and Borrower dated
February 8, 1999, together with Exhibit A thereto.
"COMMITMENTS" shall mean the Revolving Commitments and the Term Loan
Commitments.
"COMPANIES" shall mean Borrower and the Subsidiaries; and "COMPANY"
shall mean any of them.
"CONSOLIDATED COMPANIES" shall mean Borrower and its Consolidated
Subsidiaries.
"CONSOLIDATED EBITDA" shall mean, for any period, the sum (without
duplication) of the amounts for such period of Adjusted Net Income, PLUS, in
each case to the extent deducted in calculating such Adjusted Net Income, (a)
income tax expense, (b) Consolidated Interest Expense, (c) depreciation and
amortization expense, and (d) other non-cash items of expense, other than to the
extent requiring an accrual or reserve for future cash expenses all as
determined on a consolidated basis for Consolidated Companies. Consolidated
EBITDA shall be calculated on a pro forma basis
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and otherwise in accordance with GAAP and Regulation S-X under the Securities
Act to give effect to the SBCL Acquisition and any other Acquisitions and
Dispositions during the fiscal period of Borrower ended on the Test Date thereof
as if each such Acquisition had been effected on the first day of such period
and as if each such Disposition had been consummated on the day prior to the
first day of such period. In calculating Consolidated EBITDA prior to the first
anniversary of the Closing Date, such calculation shall be made on a pro forma
basis (to the extent applicable) to give effect to the SBCL Acquisition on a
basis and with adjustments substantially consistent with the calculation of
Consolidated EBITDA made in connection with satisfying the condition set forth
in Section 7.02(xiii) (and, prior to the first anniversary of the Closing Date,
Borrower shall provide Joint Lead Arrangers with an Officers' Certificate
accompanied by a schedule providing reasonable detail for each such
calculation).
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any period, the sum of
(x) all cash interest expense of Consolidated Companies for such period as
determined on a consolidated basis for Consolidated Companies in accordance with
GAAP and (y) in the event of the consummation of a Permitted Receivables
Transaction, an amount equal to the interest (or other fees in the nature of
interest or discount accrued and paid or payable in cash for such period) on
such Permitted Receivables Transaction.
"CONSOLIDATED NET INCOME" shall mean, for any period, the consolidated
net income (or loss) of Consolidated Companies for such period, determined in
conformity with GAAP, but excluding the income of any Person (other than the
Subsidiaries) in which any Company has an ownership interest, until such income
has been received by a Company in a cash distribution.
"CONSOLIDATED SUBSIDIARY" shall mean, for any Person, each Subsidiary
of such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall or should be consolidated with the financial
statements of such Person in accordance with GAAP.
"CONTEMPLATED ACQUISITION" shall mean each proposed Acquisition listed
on SCHEDULE 1.01(g).
"CONTEMPLATED DISPOSITION" shall mean each Disposition contemplated by
Companies identified on SCHEDULE 1.01(h).
"CONTEMPLATED INVESTMENT" shall mean each Investment contemplated by
Companies identified on SCHEDULE 1.01(i).
"CONTINGENT OBLIGATION" shall mean, as to any Person, any direct or
indirect liability of such Person, whether or not contingent, (a) with respect
to any Indebtedness, lease, dividend, letter of credit or other obligation (the
"PRIMARY OBLIGATIONS") of another Person (the "PRIMARY OBLIGOR"), including any
obligation of such Person (i) to purchase, repurchase or otherwise acquire such
primary obligations or any security therefor, (ii) to advance or provide funds
for the payment or discharge of any such primary obligation, or to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet item, level of income or
financial condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the
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purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (iv)
otherwise to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each of (i)-(iv), a "GUARANTY OBLIGATION"); (b)
with respect to any Surety Instrument (other than any Letter of Credit) issued
for the account of such Person or as to which such Person is otherwise liable
for reimbursement of drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered; or (d) in respect of any Swap Contract; PROVIDED, HOWEVER, that the
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection or standard contractual indemnities entered into, in each
case in the ordinary course of business. The amount of any Contingent Obligation
shall (x) in the case of a Guaranty Obligation, be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such Guaranty
Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof, and (y) in the case of
other Contingent Obligations, be equal to the maximum reasonably anticipated
liability in respect thereof. The Contingent Obligations of any Person shall
include any Indebtedness of any partnership in which such Person is the general
partner.
"CONTINUE," "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.09 of a LIBOR Loan from one Interest Period
to the next Interest Period.
"CONTRACTUAL OBLIGATION" shall mean as to any Person, any provision of
any security issued by such Person or of any mortgage, security agreement,
pledge agreement, indenture, credit agreement, securities purchase agreement,
debt instrument, contract, agreement, instrument or other undertaking to which
such Person is a party or by which it or any of its Property is bound or
subject.
"CONVERT," "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.09 of one Type of Loan into another Type of Loan, which
may be accompanied by the transfer by a Lender (at its sole discretion) of a
Loan from one Applicable Lending Office to another.
"COVERED TAXES" see Section 5.06(a).
"CREDIT DOCUMENTS" shall mean this Agreement, the Notes, the L/C
Documents and the Security Documents, as amended from time to time.
"CREDIT FACILITIES" shall mean the Term Facilities and the Revolving
Facility.
"CREDITOR" shall mean each of (a) each Agent, (b) each L/C Lender, (c)
each Lender, and (d) each party to a Swap Contract relating to the Loans if at
the date of entering into such Swap Contract such Person was a Lender or an
Affiliate of a Lender.
"DEBT ISSUANCE" shall mean the incurrence by any Company of any
Indebtedness after the Effective Date.
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"DEFAULT" shall mean any event or condition that constitutes an Event
of Default or that would become, with notice or lapse of time or both, an Event
of Default.
"DEFAULTED ADVANCE" shall mean, with respect to any Lender at any time,
the portion of any Loan required to be made by such Lender to Borrower pursuant
to Section 2 at or prior to such time that has not been made by such Lender or
by Administrative Agent for the account of such Lender pursuant to Section 4.06
as of such time. In the event that a portion of a Defaulted Advance shall be
deemed made pursuant to Section 2.12(a), the remaining portion of such Defaulted
Advance shall be considered a Defaulted Advance originally required to be made
pursuant to Section 2 on the same date as the Defaulted Advance so deemed made
in part.
"DEFAULTED AMOUNT" shall mean with, respect to any Lender at any time,
any Required Payment to be paid by such Lender to any Agent or any other Lender
hereunder or under any other Credit Document at or prior to such time that has
not been so paid as of such time. In the event that a portion of a Defaulted
Amount shall be deemed paid pursuant to Section 2.12(b), the remaining portion
of such Defaulted Amount shall be considered a Defaulted Amount originally
required to be paid hereunder or under any other Credit Document on the same
date as the Defaulted Amount so deemed paid in part.
"DEFAULTING LENDER" shall mean, at any time, any Lender that, at such
time, (a) owes, for a period of three or more consecutive Business Days, a
Defaulted Advance or a Defaulted Amount or (b) shall take any action or be the
subject of any action or proceeding of a type described in Sections 10(e)
through (g).
"DISPOSITION" shall mean (a) any conveyance, sale, lease, assignment,
transfer or other disposition (including by way of merger or consolidation and
including any Sale and Leaseback Transaction) of any Property (including
Accounts of any Company and Equity Interests of any Person owned by any Company)
(whether owned on the Effective Date or thereafter acquired) by any Company to
any Person, (b) any issuance or sale by any Subsidiary of its Equity Interests
to any Person (other than any Company), and (c) any liquidating dividend or
distribution received by any Company in respect of any Minority Interest,
excluding, however, in each case any Excluded Disposition (except for purposes
of defining the term "Excluded Disposition").
"DISPOSITION EVENT" shall mean the receipt by any Company of cash
proceeds or cash distributions of any kind in consideration for a Disposition.
"DISQUALIFIED CAPITAL STOCK" shall mean, with respect to any Person,
any Equity Interest of such Person that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures (excluding any maturity as the result of an
optional redemption by the issuer thereof) or is mandatorily redeemable or
purchaseable (other than solely for Qualified Capital Stock), pursuant to a
sinking fund obligation or otherwise, or is redeemable or purchaseable at the
sole option of the holder thereof (other than solely for Qualified Capital
Stock) or exchangeable or convertible into debt securities of the issuer thereof
at the sole option of the holder thereof, in whole or in part, on or prior to
the date which is 90 days after the Final Maturity Date.
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"DIVIDEND PAYMENT" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any Equity Interests
or Equity Rights of any Company, but excluding dividends paid through the
issuance of additional shares of Qualified Capital Stock and any redemption or
exchange of any Qualified Capital Stock of such Obligor through the issuance of
Qualified Capital Stock of such Obligor.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"DOMESTIC SUBSIDIARY" shall mean any Subsidiary other than a Foreign
Subsidiary.
"EFFECTIVE DATE" see Section 7.01.
"ELIGIBLE PERSON" shall mean (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $500.0 million; (b) a commercial bank organized under
the laws of any other country that is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus in a dollar equivalent amount
of at least $500.0 million; PROVIDED, HOWEVER, that such bank is acting through
a branch or agency located in the country in which it is organized or another
country that is also a member of the OECD; (c) an insurance company, mutual fund
or other entity which is regularly engaged in making, purchasing or investing in
loans or securities; or any other financial institution organized under the laws
of the United States, any state thereof, any other country that is a member of
the OECD or a political subdivision of any such country with assets, or assets
under management, in a dollar equivalent amount of at least $500.0 million; (d)
any Affiliate of a Lender; (e) any other entity (other than a natural person)
which is an "accredited investor" (as defined in Regulation D under the
Securities Act) which extends credit or buys loans as one of its principal
businesses or investing activities including, but not limited to, insurance
companies, mutual funds and investment funds; and (f) any other entity consented
to by each Joint Lead Arranger, Administrative Agent and Borrower. With respect
to any Lender that is a fund or commingled investment vehicle that invests in
loans, any other fund or commingled investment vehicle that invests in loans and
is managed or advised by the same investment advisor of such Lender or by an
Affiliate of such investment advisor shall be treated as a single Eligible
Person.
"EMPLOYEE BENEFIT PLAN" shall mean an employee benefit plan (as defined
in Section 3(3) of ERISA) that is maintained or contributed to by any ERISA
Entity or with respect to which Borrower or a Subsidiary could incur liability.
"ENVIRONMENTAL CLAIM" shall mean, with respect to any Person, any
written notice, claim, demand or other written communication (collectively, a
"CLAIM") by any other Person alleging such Person's liability for any costs,
cleanup costs, response or corrective action costs, damages to natural resources
or other Property, personal injuries, fines or penalties arising out of or
resulting from (a) the presence, Release or threatened Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (b) any violation of any Environmental Law. The term
"ENVIRONMENTAL CLAIM" shall include any claim by any Person seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence of
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Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"ENVIRONMENTAL LAWS" shall mean any and all present and future
applicable laws, rules or regulations of any Governmental Authority, any orders,
decrees, judgments or injunctions and the common law in each case as now or
hereafter in effect, relating to pollution or protection of human health, safety
or the environment, including without limitation, ambient air, indoor air, soil,
or surface water, ground water, land or subsurface strata, and natural resources
such as wetlands, flora or fauna, including, without limitation, those relating
to Releases or threatened Releases of Hazardous Materials into the environment,
or otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, discharge, disposal, collection, transfer, transport or
handling of Hazardous Materials.
"EQUITY INTERESTS" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents, including membership
interests (however designated, whether voting or non-voting), of capital of such
Person, including, if such Person is a partnership, partnership interests
(whether general or limited) and any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, such partnership, whether outstanding on the date
hereof or issued after the Effective Date.
"EQUITY ISSUANCE" shall mean any of (a) any issuance or sale after the
Effective Date by Borrower of any Equity Interests (including any Equity
Interests issued upon exercise of any Equity Rights) or any Equity Rights, or
(b) the receipt by Borrower after the Closing Date of any capital contribution
(whether or not evidenced by any Equity Interest issued by the recipient of such
contribution), excluding in each case, any Excluded Equity Issuance.
"EQUITY PROCEEDS" shall mean, as of any date of determination, the
aggregate amount of the net proceeds received by Borrower from the sale or sales
of, or capital contributions with respect to, its Equity Interests or Equity
Rights, after deduction of costs, discounts and commissions incurred in
connection with such sale or sales, to such date of determination.
"EQUITY RIGHTS" shall mean, with respect to any Person, any outstanding
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including any stockholders' or voting trust agreements) for the
issuance, sale, registration or voting of, or outstanding securities convertible
into, any additional shares of Equity Interests of any class, or partnership or
other ownership interests of any type in, such Person.
"ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as amended.
"ERISA ENTITY" shall mean any member of an ERISA Group.
"ERISA EVENT" shall mean (a) any "reportable event," as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Pension Plan (other than an event for which the 30-day notice period is waived);
(b) the existence with respect to any Pension Plan of an
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"accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived, the failure to make by its due
date a required installment under Section 412(m) of the Code with respect to any
Pension Plan or the failure to make any required contribution to a Multiemployer
Plan; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding standard with
respect to any Pension Plan; (d) the incurrence by any ERISA Entity of any
liability under Title IV of ERISA with respect to the termination of any Pension
Plan; (e) the receipt by any ERISA Entity from the PBGC or a plan administrator
of any notice relating to an intention to terminate any Pension Plan or to
appoint a trustee to administer any Pension Plan, or the occurrence of any event
or condition which could constitute grounds under ERISA for the termination of,
or the appointment of a trustee to administer, any Pension Plan; (f) the
incurrence by any ERISA Entity of any liability with respect to the withdrawal
or partial withdrawal from any Pension Plan or Multiemployer Plan; (g) the
receipt by an ERISA Entity of any notice, or the receipt by any Multiemployer
Plan from any ERISA Entity of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA; (h) the making of any amendment to any Pension Plan which could result
in the imposition of a lien or the posting of a bond or other security; or (i)
the occurrence of a nonexempt prohibited transaction (within the meaning of
Section 4975 of the Code or Section 406 of ERISA) which could result in
liability to any Company.
"ERISA GROUP" shall mean any Company and all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with such Company, are treated as a single
employer under Section 414 of the Code.
"EVENT OF DEFAULT" see Section 10.
"EXCESS CASH FLOW" shall mean for the relevant period, (a) the sum of
(i) Consolidated EBITDA for such period (calculated for this definition by
adding back the cash portion of all extraordinary or non-recurring items of
income (other than from Dispositions ) to the extent excluded in the calculation
of Adjusted Net Income and by deducting the cash portion of all extraordinary or
non-recurring items of expense to the extent excluded in the calculation of
Adjusted Net Income (including transaction and integration expense to the extent
related to the SBCL Acquisition and other Acquisitions permitted hereby)); (ii)
any net decrease in Working Capital during such period (except to the extent
attributable to assets or Persons subject to a Disposition during such period);
and (iii) cash received from the proceeds of any life insurance or "key man"
policies during such period (to the extent not included in Adjusted Net Income),
MINUS (b) the sum of (i) Consolidated Interest Expense to the extent paid in
cash for such period; (ii) the sum of all scheduled principal payments (other
than pursuant to Section 2.10(a)(v)) on any Indebtedness (including Capital
Leases and Term Loans pursuant to Section 3.01(b)) of Consolidated Companies
made during such period from internally generated funds, all voluntary
prepayments of Term Loans made during such period from internally generated
funds and all prepayments of Revolving Loans made during such period from
internally generated funds to the extent accompanied by a permanent reduction in
the Revolving Commitments; (iii) cash Capital Expenditures made during such
period by the Companies to the extent funded from internally generated funds;
(iv) all cash taxes actually paid to any Governmental Authority by Consolidated
Companies during such period (other than any taxes relating to Dispositions or
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Excluded Dispositions not in the ordinary course of business); (v) cash paid
during such period for any Acquisition permitted by Section 9.06 to the extent
made from internally generated funds; (vi) any net increases in Working Capital
during such period (except to the extent attributable to assets or Persons
subject to an Acquisition during such period); (vii) the amount of dividends on
the Voting Cumulative Preferred Stock paid during such period in cash; (viii)
all cash payments during such period to effect the settlement of governmental
and other claims arising out of alleged violations of applicable federal fraud
and health care statutes and relating to billing practices to the extent (A)
covered by reserves, (B) not otherwise deducted in calculating Adjusted Net
Income for such period, (C) not reimbursed by a third party and (D) not funded
from sources other than internally generated funds; (ix) Investments permitted
under Section 9.09 (except cash and Cash Equivalents) to the extent funded from
internally generated funds; (x) cash outlays for Permitted Customary Liens to
the extent not otherwise deducted in calculating Adjusted Net Income; (xi) cash
payments made during such period permitted by Section 9.10(b)(iii); and (xii)
any earnings included in Consolidated EBITDA for such period of a Receivables
Co. to the extent the terms of any Permitted Receivables Transaction prohibit
the distribution thereof to any Obligor.
"EXCHANGE ACT" shall mean the United States Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission promulgated
thereunder.
"EXCHANGE INDENTURE" shall mean an indenture pursuant to which Exchange
Notes are issued.
"EXCHANGE NOTES" see Section 9.08(A)(j).
"EXCHANGE OFFER" see Section 9.08(A)(j).
"EXCLUDED DISPOSITIONS" shall mean (a) Dispositions for fair market
value resulting in no more than $500,000 in aggregate proceeds per Disposition
(or series of related Dispositions) and less than $10.0 million in aggregate
proceeds in any fiscal year; (b) an exchange of equipment or inventory for other
equipment or inventory, provided that the Company effecting such exchange
receives at least substantially equivalent value in such exchange for the
Property disposed of; (c) any Permitted Lien, the making of any Investment
permitted by Section 9.09 and any Dividend Payment permitted by Section 9.10;
(d) any issuance of Equity Interests by any Subsidiary to directors or nominees
if resulting in DE MINIMIS proceeds; and (e) the sale of inventory in the
ordinary course of business.
"EXCLUDED ENTITY" shall mean each Excluded Subsidiary, each Foreign
Subsidiary, each Joint Venture Holding Company and each Qualified Joint Venture.
"EXCLUDED EQUITY ISSUANCE" shall mean (a) any issuance of common Equity
Interests of Borrower to the seller or sellers in consideration for a Permitted
Acquisition or pursuant to the SBCL Acquisition Agreement, (b) any issuance or
sale by Borrower of Equity Interests of Borrower to or for the account of
current or former employees, directors, officers or consultants pursuant to a
benefit or compensation plan or agreement, (c) any issuance of Qualified Capital
Stock of Borrower to the extent that the proceeds thereof are used for a
substantially contemporaneous purchase or
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redemption of Equity Interests of Borrower contemplated by Section 9.10(b)(ii),
and (d) any issuance of Equity Interests by any Subsidiary to directors or
nominees if resulting in DE MINIMIS proceeds.
"EXCLUDED EXISTING LIENS" shall mean all Liens (including any Prior
Liens) in existence on the Effective Date so long as (i) any such Lien which is
securing liabilities greater than or equal to $1.0 million is identified with
particularity on SCHEDULE 9.07 and (ii) all such Liens identified on SCHEDULE
9.07 when aggregated with all such Liens not identified on SCHEDULE 9.07 do not
exceed $20.0 million in the aggregate.
"EXCLUDED SUBSIDIARY" shall mean each Subsidiary existing on the
Effective Date identified on SCHEDULE 1.01(E) as an Excluded Subsidiary unless
and until (other than in the case of a Joint Venture Holding Company) either (a)
such Subsidiary has consolidated assets in excess of $5.0 million or (b) such
Subsidiary's consolidated revenues for any fiscal year of Borrower exceed 1.0%
of Borrower's consolidated revenues for such fiscal year (and thereafter such
Subsidiary shall be deemed not an "Excluded Subsidiary").
"EXCLUDED TAXES" see Section 5.06(a).
"EXISTING AFFILIATE AGREEMENTS" see Section 9.15.
"EXISTING CREDIT FACILITIES" shall mean the existing $450.0 million
credit facilities of Borrower pursuant to a credit agreement dated as of
December 5, 1996 (as amended through the date hereof) agented by Morgan Guaranty
Trust Company of New York, as administrative agent.
"EXISTING CREDIT FACILITIES REPAYMENT" shall mean the repayment of all
Indebtedness and cancellation of all commitments to make extensions of credit
under the Existing Credit Facilities.
"EXISTING INDENTURE" shall mean the Indenture pursuant to which the
Existing Notes were issued.
"EXISTING NOTES" shall mean Borrower's $150.0 million aggregate
principal amount of 10 3/4% Senior Subordinated Notes due 2006.
"FAIR MARKET VALUE" shall mean, with respect to any Property, a price
(after taking into account any liabilities relating to such Property), as
determined by Borrower in good faith, that is within a reasonable range of
prices which could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of which is
under any compulsion to complete the transaction.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate PER ANNUM
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; PROVIDED, however, that (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Business Day
as so published on the next succeeding Business Day and (b) if such rate
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is not so published for any Business Day, the Federal Funds Rate for such
Business Day shall be the average rate quoted to Administrative Agent on such
Business Day on such transactions by three federal funds brokers of recognized
standing, as determined by Administrative Agent.
"FEE LETTER" shall mean the Credit Facilities Fee Letter dated as of
February 8, 1999 among Merrill Lynch Capital Corporation, BAS (f/k/a NationsBanc
Montgomery Securities LLC), Bank of America (f/k/a NationsBank, N.A.) and
Borrower.
"FINAL MATURITY DATE" shall mean August 16, 2007; PROVIDED, HOWEVER,
that if at January 10, 2000 more than $15.0 million in aggregate principal
amount of the Existing Notes remains outstanding, then the Final Maturity Date
shall be June 15, 2006.
"FINANCIAL MAINTENANCE COVENANTS" shall mean the covenants set forth in
Sections 9.11(a) through (d).
"FIXED CHARGE COVERAGE RATIO" shall mean, for any Test Date, the ratio
of (x) Consolidated EBITDA for the four fiscal quarters ending on such Test Date
to (y) Fixed Charges for the four fiscal quarters ending on such Test Date.
Until June 30, 2000, the component of Fixed Charges that is Consolidated
Interest Expense shall be deemed to equal the product of (i) Consolidated
Interest Expense since the Closing Date to the date in question and (ii) a
fraction, the numerator of which is 365 and the denominator of which is the
number of days since the Closing Date. In addition, prior to the Test Date as of
September 30, 2000, Capital Expenditures as a component of Fixed Charges shall
be calculated by adding to the amount of Capital Expenditures otherwise
calculated in accordance with this definition the following amounts on the
following Test Dates: $31,200,000 for the Test Date as of September 30, 1999;
$22,762,000 for the Test Date as of December 31, 1999; $11,203,000 for the Test
Date as of March 31, 2000; and $7,800,000 for the Test Date as of June 30, 2000.
"FIXED CHARGES" shall mean, for any period, the sum of (a) Consolidated
Interest Expense for such period to the extent paid or payable in cash during
such period, (b) the sum of all scheduled principal payments on any Indebtedness
of Consolidated Companies (including, without duplication, any lease payments in
respect of Capital Leases of Consolidated Companies attributable to the
principal component thereof for such period (other than Capital Leases in
existence on the Effective Date to the extent of the amount of the principal
component of such Capital Leases on the Closing Date after giving effect to the
SBCL Acquisition) but excluding any prepayment of a type contemplated by Section
2.10), (c) all cash income tax expense actually paid to any Governmental
Authority by Consolidated Companies for such period (other than taxes related to
Dispositions or Excluded Dispositions not in the ordinary course of business and
other than taxes for which Borrower is entitled to be reimbursed pursuant to its
indemnity agreement from Corning, SmithKline Beecham Corporation or SmithKline
Beecham plc (as the case may be) to the extent Borrower has notified Corning,
SmithKline Beecham Corporation or SmithKline Beecham plc (as the case may be) of
the same in accordance with such agreement and to the extent such agreement is
in full force and effect and such reimbursement claim has not been disputed by
Corning, SmithKline Beecham Corporation or SmithKline Beecham plc (as the case
may be) or the party liable), (d) Capital Expenditures during
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such period to the extent made from internally generated funds, and (e) all
dividends paid during such period on the Voting Cumulative Preferred Stock.
"FOREIGN LENDER CERTIFICATE" see Section 5.06.
"FOREIGN PLAN" shall mean any employee benefit plan, program, policy,
arrangement or agreement maintained or contributed to by, or entered into with,
any Company with respect to employees employed outside the United States.
"FOREIGN SUBSIDIARY" shall mean any direct or indirect Subsidiary
organized outside of the United States as defined in Section 7701(a)(9) of the
Code (or any successor provision).
"FUNDED INDEBTEDNESS" shall mean, at the date of determination thereof,
any Indebtedness of any Company which by its terms matures more than one year
after the date of calculation, and any such Indebtedness maturing within one
year from such date which is renewable or extendible at the option of the
obligor to a date more than one year from such date including, in any event, all
current maturities and current sinking fund payments in respect of such
Indebtedness whether or not required to be paid within one year from the date of
its creation and Indebtedness in respect of Loans, in each case determined on a
consolidated basis in conformity with GAAP.
"FUNDING DATE" shall mean the date of the making of any extension of
credit hereunder (including the Closing Date).
"GAAP" shall mean generally accepted accounting principles set forth as
of the relevant date in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination.
"GOVERNMENTAL AUTHORITY" shall mean any national, state, county, city,
town, village, municipal or other local government department, commission,
board, bureau, agency, authority, or instrumentality of the United States or any
other national authority or any political subdivision of any thereof, and any
Person exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any of the foregoing entities, having jurisdiction
over the Person or matters in question.
"GUARANTEE" shall mean the guarantee of each Guarantor pursuant to
Section 6.
"GUARANTEED OBLIGATIONS" see Section 6.01.
"GUARANTORS" shall mean each Subsidiary listed on SCHEDULE 1.01(d) and
each Subsidiary that after the Effective Date guarantees the payment of the
Obligations pursuant to Section 7.02(xvi) or Section 9.20.
"GUARANTY OBLIGATION" see the definition of Contingent Obligation.
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"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, toxic,
hazardous or extremely hazardous substance, constituent or waste, or any other
constituent, waste, material, compound or substance regulated under any
Environmental Law including, without limitation, petroleum or any petroleum
product, including crude oil or any fraction thereof, polychlorinated biphenyls,
urea-formaldehyde insulation and friable asbestos.
"INCUR" shall mean, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (including by conversion,
exchange or otherwise), assume, guarantee or otherwise become liable in respect
of such Indebtedness or other obligation or the recording, as required pursuant
to GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person, or to grant or create a Lien upon any Property of
such Person to secure any Indebtedness of another Person (and "INCURRENCE,"
"INCURRED" and "INCURRING" shall have meanings correlative to the foregoing).
"INDEBTEDNESS" shall mean, for any Person, without duplication, (a) all
indebtedness for borrowed money of such Person; (b) all obligations issued,
undertaken or assumed by such Person as the deferred purchase price of Property
or services (other than trade payables and accrued expenses); (c) all unpaid
reimbursement obligations in respect of Letters of Credit and all non-contingent
reimbursement or payment obligations of such Person with respect to Surety
Instruments that are not reimbursed within three Business Days (such as, for
example, unpaid reimbursement obligations in respect of a drawing under a letter
of credit); (d) all obligations of such Person evidenced by notes, bonds (other
than bid or performance bonds), debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of Property
or businesses; (e) all indebtedness of such Person created or arising under any
conditional sale or other title retention agreement, or incurred as financing,
in either case with respect to Property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such Property (other than
operating leases)); (f) all Capital Lease Obligations of such Person; (g) all
indebtedness of other Persons referred to in clauses (a) through (f) above
secured by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in Property
(including accounts and contracts rights) owned by such Person, whether or not
such Person has assumed or become liable for the payment of such indebtedness
(PROVIDED that the amount of indebtedness shall be deemed to be limited to the
lesser of the fair market value of such Property and the principal amount
outstanding if such Person has not assumed or become liable for the payment of
such indebtedness); (h) bankers' acceptances; and (i) all Guaranty Obligations
of such Person in respect of indebtedness or obligations of any other Person of
the kinds referred to in clauses (a) through (h) above. Indebtedness shall not
include accounts extended by suppliers in the ordinary course of business in
connection with the purchase of goods and services.
"INDEMNITEE" see Section 12.03(b).
"INSOLVENCY PROCEEDING" shall mean, with respect to any Person, (a) any
case, action or proceeding with respect to such Person before any court or by or
before any other Governmental Authority relating to bankruptcy, insolvency,
reorganization, liquidation, receivership, dissolution, sequestration,
conservatorship, winding-up or relief of debtors (or the convening of a meeting
or the
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passing of a resolution for or with a view to any of the foregoing), or (b) any
assignment for the benefit of creditors, composition, marshalling of assets for
creditors, or other similar arrangement in respect of such Person's creditors
generally or any substantial portion of its creditors.
"INTELLECTUAL PROPERTY" see Section 8.24.
"INTEREST COVERAGE RATIO" shall mean, for any Test Date, the ratio of
(x) Consolidated EBITDA for the four fiscal quarters ending on such Test Date to
(y) Consolidated Interest Expense for the four fiscal quarters ending on such
Test Date. Until June 30, 2000, Consolidated Interest Expense shall equal the
product of (i) Consolidated Interest Expense since the Closing Date to the date
in question and (ii) a fraction, the numerator of which is 365 and the
denominator of which is the number of days since the Closing Date.
"INTEREST PERIOD" shall mean, with respect to any LIBOR Loan, each
period commencing on the date such LIBOR Loan is made or Converted from an ABR
Loan or the last day of the next preceding Interest Period for such LIBOR Loan
and (subject to the requirements of Section 2.09) ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as Borrower may select as provided in Section 4.05, except that each
Interest Period that commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month. Notwithstanding the foregoing: (a) if any
Interest Period for any Revolving Loan would otherwise end after the R/C
Termination Date, such Interest Period shall end on the R/C Termination Date;
(b) no Interest Period for any Term Loan may commence before and end after any
Principal Payment Date, unless, after giving effect thereto, the aggregate
principal amount of the Term Loans having Interest Periods that end after such
Principal Payment Date shall be equal to or less than the aggregate principal
amount of the Term Loans scheduled to be outstanding after giving effect to the
payments of principal required to be made on such Principal Payment Date; (c)
each Interest Period that would otherwise end on a day that is not a Business
Day shall end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next preceding
Business Day); and (d) notwithstanding clauses (a) and (b) above, no Interest
Period shall have a duration of less than one month and, if the Interest Period
for any LIBOR Loan would otherwise be a shorter period, such Loan shall not be
available hereunder as a LIBOR Loan for such period.
"INTEREST RATE CERTIFICATE" shall mean an Officers' Certificate
substantially in the form of EXHIBIT C-1, delivered pursuant to Section 9.01(e),
demonstrating in reasonable detail the calculation of the Total Leverage Ratio
as of any Test Date.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
"INTERNALLY GENERATED FUNDS" shall mean funds not generated from the
proceeds of any Loan, Debt Issuance, Equity Issuance, Disposition, insurance
recovery or Indebtedness (in each case
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without regard to the exclusions from the definition thereof (other than sales
of inventory in the ordinary course of business)).
"IN THE ORDINARY COURSE OF BUSINESS" shall mean in the ordinary course
of business of the Companies.
"INVENTORY" shall have the meaning as defined in the Uniform Commercial
Code as in effect in the State of New York.
"INVESTMENT" shall mean, for any Person: (a) the acquisition (whether
for cash, Property, services or securities or otherwise) of Equity Interests,
Equity Rights, bonds, notes, debentures or other securities of any other Person;
(b) the making of any deposit (other than demand deposits or accounts receivable
in the ordinary course) with, or advance, loan or other extension of credit to,
any other Person (including the purchase of Property from another Person subject
to an understanding or agreement, contingent or otherwise, to resell such
Property to such Person); and (c) any capital contribution to (by means of any
transfer of cash or other Property to others or any payment for Property or
services for the account or use of others) any other Person.
"JOINDER AGREEMENT" shall mean a Joinder Agreement substantially in the
form of EXHIBIT I.
"JOINT LEAD ARRANGERS" see the introduction hereto.
"JOINT VENTURE" shall mean a corporation, partnership, limited
liability company, joint venture or other similar legal arrangement (whether
created by contract or conducted through a separate legal entity) now or
hereafter formed by any Company with another Person or Persons in order to
conduct a common venture or enterprise with such Person or Persons.
"JOINT VENTURE HOLDING COMPANY" shall mean a Subsidiary the only
material non-cash asset of which is its ownership interest in a Qualified Joint
Venture and the cash assets of which are promptly distributed.
"LAWS" shall mean, collectively, all common law and all international,
foreign, federal, state and local statutes, treaties, rules, guidelines,
regulations, ordinances, codes and administrative or judicial precedents,
including without limitation the interpretation thereof by any Governmental
Authority charged with the enforcement thereof.
"L/C DOCUMENTS" shall mean, with respect to any Letter of Credit,
collectively, any other agreements, instruments, guarantees or other documents
(whether general in application or applicable only to such Letter of Credit)
governing or providing for (a) the rights and obligations of the parties
concerned or at risk with respect to such Letter of Credit or (b) any collateral
security for any of such obligations, each as the same may be modified and
supplemented and in effect from time to time.
"L/C INTEREST" shall mean, for each Revolving Lender, such Lender's
participation interest (or, in the case of L/C Lender, L/C Lender's retained
interest) in L/C Lender's liability under
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Letters of Credit and such Lender's rights and interests in Reimbursement
Obligations and fees, interest and other amounts payable in connection with
Letters of Credit and Reimbursement Obligations.
"L/C LENDER" shall mean Bank of America, N.A. or any of its Affiliates,
or such other Lender or Lenders which have agreed to act in such capacity,
have been selected by Administrative Agent and are reasonably satisfactory to
Borrower, as the issuer of Letters of Credit under Section 2.03, together with
its successors and assigns in such capacity.
"L/C LIABILITY" shall mean, without duplication, at any time and in
respect of any Letter of Credit, the sum of (a) the undrawn face amount of such
Letter of Credit, PLUS (b) the aggregate unpaid principal amount of all
Reimbursement Obligations at such time in respect of all drawings made under
such Letter of Credit.
"LEASE" shall mean any lease, sublease, franchise agreement, license,
occupancy or concession agreement.
"LENDER" and "LENDERS" see the introduction hereto.
"LETTER OF CREDIT" see Section 2.03.
"LIBO RATE" shall mean, for any LIBOR Loan for any Interest Period
therefor, a rate PER ANNUM (rounded upwards, if necessary, to the nearest 1/100
of 1%) determined by Administrative Agent to be equal to the LIBOR Base Rate for
such Loan for such Interest Period divided by 1 minus the Reserve Requirement
(if any) for such Loan for such Interest Period.
"LIBOR BASE RATE" shall mean, with respect to any LIBOR Loan for any
Interest Period therefor, the rate PER ANNUM determined by Administrative Agent
to be the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered
rates for deposits in Dollars with a term comparable to such Interest Period
that appears on the Telerate British Bankers Assoc. Interest Settlement Rates
Page (as defined below) at approximately 11:00 a.m., London, England time, on
the second full Business Day preceding the first day of such Interest Period (as
adjusted for maximum statutory reserves (if applicable)); PROVIDED, HOWEVER,
that (a) if no comparable term for an Interest Period is available, the LIBOR
Base Rate shall be determined using the weighted average of the offered rates
for the two terms most nearly corresponding to such Interest Period and (b) if
there shall at any time no longer exist a Telerate British Bankers Assoc.
Interest Settlement Rates Page, "LIBOR BASE RATE" shall mean, with respect to
each day during each Interest Period pertaining to LIBOR Loans comprising part
of the same borrowing, the rate PER ANNUM equal to the rate at which
Administrative Agent is offered deposits in Dollars at approximately 11:00 a.m.,
London, England time, two Business Days prior to the first day of such Interest
Period in the London interbank market for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to its portion of the amount of such LIBOR Loan to be outstanding
during such Interest Period. "TELERATE BRITISH BANKERS ASSOC. INTEREST
SETTLEMENT RATES PAGE" shall mean the display designated as Page 3750 on the
Telerate System Incorporated Service (or such other page as may replace such
page on such service for the purpose of displaying the rates at which Dollar
deposits are offered by leading banks in the London interbank deposit markets).
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"LIBOR LOANS" shall mean Loans that bear interest at rates based on
rates referred to in the definition of "LIBO Rate" in this Section 1.01.
"LIEN" shall mean, with respect to any Property, any mortgage, lien,
pledge, claim, charge, security interest or encumbrance of any kind, any other
type of preferential arrangement in respect of such Property having the effect
of a security interest or any filing consented to by any Company of any
financing statement under the UCC or any other similar notice of Lien under any
similar notice or recording statute of any Governmental Authority consented to
by any Company, including any easement, right-of-way or other encumbrance on
title to Real Property, and any agreement to give any of the foregoing.
"LOANS" shall mean the Revolving Loans, the Swing Loans and the Term
Loans.
"LOSSES" of any Person shall mean the losses, liabilities, claims
(including those based upon negligence, strict or absolute liability and
liability in tort), damages, reasonable expenses, obligations, penalties,
actions, judgments, encumbrances, liens, penalties, fines, suits, reasonable and
documented costs or disbursements of any kind or nature whatsoever (including
reasonable fees and expenses of counsel in connection with any Proceeding
commenced or threatened in writing, whether or not such Person shall be
designated a party thereto) at any time (including following the payment of the
Obligations) incurred by, imposed on or asserted against such Person.
"MAJORITY LENDERS" shall mean (a) at any time prior to the Closing
Date, Lenders holding at least a majority of the aggregate amount of the
Commitments, and (b) at any time after the Closing Date, Lenders holding at
least a majority of the sum of (without duplication) (i) the aggregate principal
amount of outstanding Loans, PLUS (ii) the aggregate amount of all L/C
Liabilities, PLUS (iii) the aggregate Unutilized Revolving Commitments then in
effect; PROVIDED, HOWEVER, that if any Lender shall be a Defaulting Lender at
such time, there shall be excluded from the determination of Majority Lenders at
such time (A) the aggregate principal amount of the Loans owing to such Lender
(in its capacity as a Lender) and outstanding at such time and (B) such Lender's
Unutilized Revolving Commitment at such time.
"MAJORITY PRO RATA LENDERS" see Section 12.04(i)(m).
"MAJORITY REVOLVING LENDERS" shall mean (a) at any time prior to the
Closing Date, Lenders holding at least a majority of the aggregate amount of the
Revolving Commitment, and (b) at any time after the Closing Date, Lenders
holding at least a majority of the sum of (without duplication) (i) the
aggregate principal amount of outstanding Revolving Loans, PLUS (ii) the
aggregate amount of all L/C Liabilities, PLUS (iii) the aggregate Unutilized
Revolving Commitments then in effect, PLUS (iv) in the case of the Swing Loan
Lender only, the aggregate amount of Swing Loans then outstanding; PROVIDED,
HOWEVER, that if any Lender shall be a Defaulting Lender at such time, there
shall be excluded from the determination of Majority Revolving Lenders at such
time (A) the aggregate principal amount of the Loans owing to such Lender (in
its capacity as a Lender) and outstanding at such time and (B) such Lender's
Unutilized Revolving Commitment at such time.
<PAGE>
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"MARGIN STOCK" shall mean margin stock within the meaning of
Regulations T, U and X.
"MATERIAL ADVERSE CHANGE" shall mean, with respect to any Person, a
material adverse change, or any condition or event that has resulted in a
material adverse change (after taking into account the restructuring charges and
incurrence of Indebtedness contemplated by the Transactions), in the business,
operations, financial condition or assets of such Person, together with its
Subsidiaries taken as a whole (after taking into account indemnification
obligations by third parties that are Solvent to the extent that such third
party has not disputed (after notice of claim in accordance with the applicable
agreement therefor) liability to make such indemnification payment). "PERSON" as
used in this definition of Material Adverse Change shall refer to the Qualified
Companies taken as a whole.
"MATERIAL ADVERSE EFFECT" shall mean an event, circumstance,
occurrence, or condition which has caused as of any date of determination any of
(a) a material adverse effect, or any condition or event that has resulted in a
material adverse effect (after taking into account the restructuring charges and
incurrence of debt contemplated by the Transactions), on the business,
operations, financial condition or assets of the Qualified Companies taken as a
whole (after taking into account indemnification obligations by third parties
that are Solvent to the extent that such third party has not disputed (after
notice of claim in accordance with the applicable agreement therefor) liability
to make such indemnification payment), (b) a material adverse effect on the
ability of the Obligors to consummate in a timely manner the Transactions or to
perform any of their material obligations under any Credit Document or (c) a
material adverse effect on the legality, binding effect or enforceability of any
Credit Document or any of the material rights and remedies of any Creditor
thereunder or the legality, priority, or enforceability of the Lien on a
material portion of the Collateral.
"MERRILL LYNCH" see the introduction to this Agreement.
"MINORITY INTEREST" shall mean an Investment in any Person that is not
a Subsidiary (including any Joint Venture).
"MOODY'S" shall mean Moody's Investors Service, Inc.
"MORTGAGE" shall mean an agreement, including, but not limited to, a
mortgage, deed of trust or any other document, creating and evidencing a Lien on
a Mortgaged Real Property, which shall be in form and substance reasonably
satisfactory to Administrative Agent, with such schedules and including such
provisions as shall be necessary to conform such document to applicable or local
law or as shall be customary under local law, as the same may at any time be
amended in accordance with the terms thereof and hereof.
"MORTGAGED REAL PROPERTY" shall mean (A) each Real Property identified
on SCHEDULE 1.01(j) and (B) each Real Property, if any, which shall be subject
to a Mortgage delivered after the Closing Date pursuant to Section 9.12.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan within the meaning
of Section 4001(a)(3) of ERISA (a) to which any ERISA Entity is then making or
accruing an obligation to make
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contributions, (b) to which any ERISA Entity has within the preceding five plan
years made contributions, including any Person which ceased to be an ERISA
Entity during such five year period, or (c) with respect to which any Company
could incur liability.
"NAIC" shall mean the National Association of Insurance Commissioners.
"NET AVAILABLE PROCEEDS" shall mean:
(a) in the case of any Disposition Event, the amount of Net Cash
Payments received by any Company in connection with such Disposition Event,
net of, in the case of any Permitted Receivables Transaction, any escrowed
or pledged cash proceeds which effectively secure, or are required to be
maintained as reserves by the applicable Receivables Co. for, the
obligations of any Company under such Permitted Receivables Transaction;
(b) in the case of any Casualty Event, the aggregate amount of cash
proceeds of insurance, condemnation awards and other compensation received
by any Company in respect of such Casualty Event net of (i) fees and
expenses incurred by such Company in connection with recovery thereof, (ii)
repayments of Indebtedness (other than Indebtedness hereunder) secured by a
Lien on such Property that is permitted by the Credit Documents, and (iii)
any Taxes paid or payable by any Company in respect of the amount so
recovered (after application of all credits and other offsets); and
(c) in the case of any Equity Issuance or any Debt Issuance, the
aggregate amount of all cash received by any Company in respect thereof net
of all investment banking fees, discounts and commissions, taxes, legal
fees, consulting fees, accountants' fees, underwriting discounts,
commissions and other fees and expenses, actually incurred in connection
therewith, net of, in the case of any Permitted Receivables Transaction,
any escrowed or pledged cash proceeds which effectively secure, or are
required to be maintained as reserves by the applicable Receivables Co.
for, the Indebtedness of any Company in respect of such Permitted
Receivables Transaction.
"NET CASH PAYMENTS" shall mean, with respect to any Disposition Event,
the aggregate amount of all cash payments (including any cash payments received
by way of deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise, but only as and
when received) received by any Company directly or indirectly in connection with
such Disposition Event, net (without duplication) of (a) the amount of all fees
and expenses paid by any Company in connection with such Disposition Event (the
"RELEVANT DISPOSITION"); (b) any Taxes paid or estimated to be payable by any
Company as a result of the Relevant Disposition (after application of all
credits and other offsets); (c) any repayments by any Company of Indebtedness
(other than the Obligations) to the extent that such Indebtedness is secured by
a Permitted Lien on the subject Property; (d) amounts required to be paid to any
Person (other than any Company) owning a beneficial interest in the subject
Property; and (e) amounts reserved, in accordance with GAAP, against any
liabilities retained by any Company after such Relevant Disposition and related
thereto, including pension and other post-employment benefit liabilities,
liabilities related to environmental
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matters and liabilities under any indemnification obligations associated with
such Relevant Disposition.
"NET WORTH" shall mean, at any time for the determination thereof, the
sum of the capital stock and additional paid-in capital, PLUS retained earnings
(or MINUS accumulated deficit) as determined on a consolidated basis for
Consolidated Companies in conformity with GAAP, PLUS any non-recurring or
extraordinary items of expense for such period and the tax consequences thereof,
PLUS transaction and integration expenses related to the SBCL Acquisition (the
cash amount related to the SBCL Acquisition being limited to an aggregate
pre-tax amount of $300.0 million (it being understood that the write-down of
accounts receivable in connection with the SBCL Acquisition are not cash
expenses)) for such period and the tax consequences thereof.
"NON-QUALIFIED FOREIGN SUBSIDIARY" shall mean each Foreign Subsidiary
that is not a Qualified Company.
"NON-QUALIFIED SUBSIDIARY" shall mean any Subsidiary other than a
Qualified Subsidiary.
"NON-U.S. LENDER" see Section 5.06(b).
"NOTE DEFEASANCE" shall mean the defeasance of all covenants and events
of default (except to the extent prohibited by the terms of the Existing
Indenture) relating to the Existing Notes.
"NOTES" shall mean the Revolving Notes, the Term Loan Notes and the
Swing Loan Notes.
"NOTE TENDER" shall mean the tender offer and consent solicitation with
respect to the Existing Notes by Borrower pursuant to documentation and on terms
and conditions satisfactory to Joint Lead Arrangers.
"NOTICE OF ASSIGNMENT" shall mean a notice of assignment pursuant to
Section 12.06 substantially in the form of EXHIBIT F.
"NOTICE OF BORROWING" shall mean a notice of borrowing substantially in
the form of EXHIBIT G.
"OBLIGATIONS" shall mean all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing by any
Obligor to any Creditor or any of its Related Parties or their respective
successors, transferees or assignees pursuant to the terms of any Credit
Document or any Swap Contract relating to the Loans or secured by any of the
Security Documents, whether or not the right of such Person to payment in
respect of such obligations and liabilities is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured and whether or not such claim is
discharged, stayed or otherwise affected by any bankruptcy case or insolvency or
liquidation proceeding.
"OBLIGORS" shall mean Borrower and the Guarantors.
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"OFFICERS' CERTIFICATE" shall mean, as applied to any corporation, a
certificate executed on behalf of such corporation by its Chairman of the Board
(if an officer) or its Chief Executive Officer or its President or one of its
Vice Presidents (or an equivalent officer) and by its Chief Financial Officer,
Vice President-Finance or its Treasurer, Chief Accounting Officer or Corporate
Controller (or an equivalent officer) or any Assistant Treasurer in their
official (and not individual) capacities.
"ORGANIC DOCUMENT" shall mean, relative to any Person, its certificate
of incorporation, its by-laws, its partnership agreement, its memorandum and
articles of association, share designations or similar organization documents
and all shareholder agreements, voting trusts and similar arrangements
applicable to any of its authorized Equity Interests.
"ORIGINAL LENDERS" shall mean the Lenders named on the signature pages
hereof who were Lenders at the Effective Date.
"OTHER TAXES" see Section 5.06(c).
"PARTICIPANT" see Section 12.06(c).
"PAYMENT DATE" shall mean any Principal Payment Date and each date on
which interest is due and payable on any Loan.
"PAYOR" see Section 4.06.
"PBGC" shall mean the United States Pension Benefit Guaranty
Corporation or any successor thereto.
"PENSION PLAN" shall mean an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code or Section 302 of ERISA
and is maintained or contributed to by any ERISA Entity or with respect to which
any Company could incur liability.
"PERMITS" see Section 8.17.
"PERMITTED ACQUISITION" shall mean any Acquisition effected in
compliance with Section 9.06(h), (m) or (o).
"PERMITTED CUSTOMARY LIENS" shall mean (a) Liens imposed by any
Governmental Authority for taxes, assessments or charges (other than any DE
MINIMIS taxes, assessments or charges) not yet due or which are being contested
in good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Companies, in accordance with GAAP;
(b) Liens imposed by law which were incurred in the ordinary course of business,
such as carriers', warehousemen's, landlords' and mechanics' Liens and other
similar Liens arising in the ordinary course of business, in each case for sums
the payment of which is not required by Section 9.03; (c) pledges or deposits
under workers' compensation, unemployment insurance and other social security
legislation (including the Federal Employer's Liability Act) or the deposits
securing the liability to insurance carriers, in each case arising in the
ordinary course of business; (d) pledges or deposits to
<PAGE>
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secure the performance of bids, contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business
under insurance or self insurance agreements; (e) easements, rights-of-way,
restrictions or minor defects or irregularities in title incurred in the
ordinary course of business and encumbrances consisting of zoning restrictions,
easements, licenses, restrictions on the use of Real Property or minor
imperfections in title thereto which, in the aggregate, are not material in
amount, and which do not in any case materially detract from the value of the
Real Property subject thereto or interfere with the ordinary conduct of the
business of any Company; (f) Liens consisting of judgment or judicial attachment
Liens (including pre-judgment attachment) in existence less than 60 days after
the entry thereof or the enforcement of which is effectively stayed or payment
of which is covered in full (subject to a customary deductible) by insurance or
which do not otherwise result in an Event of Default under Section 10(h) or (n);
(g) any obligations or duties affecting any of the Property of any Company to
any municipality or public authority with respect to any franchise, grant,
license or permit which do not materially impair the use of such Property for
the purposes for which it is held; (h) leases or subleases granted by any
Company to third Persons not interfering in any material respect with the
business of such Company; (i) Liens arising from UCC financing statements
regarding leases permitted by this Agreement; (j) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of custom
duties in connection with the importation of goods so long as such Liens attach
only to the imported goods; (k) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by any Company in the ordinary
course of business; (l) Liens that are contractual rights of set-off; (m) Liens
arising in connection with any escrow or similar arrangement to secure executive
compensation in an amount not exceeding $7.5 million; and (n) Liens on
Intellectual Property to the extent such Liens arise from the granting of
licenses to use such Intellectual Property and which do not interfere in any
material respect with the conduct of the business of Consolidated Companies.
"PERMITTED INVESTMENTS" shall mean: (a) operating deposit accounts and
certificates of deposit with banks in the ordinary course of business; (b)
without duplication, Investments that constitute Indebtedness or Contingent
Obligations permitted under Section 9.08; (c) extensions of credit in the nature
of (i) accounts receivable or notes receivable arising from the sale or lease of
goods or services in the ordinary course of business and (ii) prepayments and
other credits to suppliers made in the ordinary course of business; (d) pledges
or deposits in connection with workers' compensation, unemployment or other
insurance and other social security or similar legislation; (e) pledges or
deposits in connection with (i) the non-delinquent performance of bids,
contracts (other than for borrowed money), leases or statutory obligations, (ii)
contingent obligations on surety or appeal bonds, and (iii) other non-delinquent
obligations of a like nature, in each case incurred in the ordinary course of
business; (f) investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers or in
settlement of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business; (g) Capital Expenditures
(other than Acquisitions) and Liens not prohibited by this Agreement; and (h)
cash and Cash Equivalents.
"PERMITTED LIENS" see Section 9.07.
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"PERMITTED OBLIGATIONS" shall mean: (a) Contingent Obligations in
respect of operating leases of any Company entered into in the ordinary course
of business and otherwise permitted by the terms of this Agreement; (b)
Indebtedness and Contingent Obligations arising from honoring a check, draft or
similar instrument against insufficient funds; PROVIDED, HOWEVER, that such
Indebtedness and Contingent Obligations are extinguished within four Business
Days of their incurrence; (c) Swap Contracts entered into in the ordinary course
of business (as a BONA FIDE hedge and not for speculative purposes) and designed
to protect the Obligors against fluctuations in interest rates, currency
exchange rates, or similar risks (including any Interest Rate Protection
Agreement entered into pursuant to Section 9.18); (d) Contingent Obligations in
connection with Excluded Dispositions or Dispositions permitted under Section
9.06 arising in connection with indemnification and other agreements in respect
of any contract relating to such Excluded Disposition or Disposition (expressly
excluding however any Contingent Obligation in respect of any obligation of any
third Person incurred in connection with the acquisition of the Property which
is the subject of such Excluded Disposition or Disposition); (e) Indebtedness or
Contingent Obligations of any Company to (including obligations in respect of
letters of credit for the benefit of) any Person providing workers'
compensation, health, disability or other employee benefits or property,
casualty, liability or other insurance to any Company; and (f) Indebtedness or
Contingent Obligations of any Company in respect of performance bonds, bid
bonds, appeal bonds, surety bonds and similar obligations and trade letters of
credit, in each case provided in the ordinary course of business, including
those incurred to secure health, safety and environmental obligations in the
ordinary course of business, and any extension, renewal or refinancing thereof
to the extent the amount of refinancing Indebtedness or Contingent Obligations
is not greater than the amount of Indebtedness or Contingent Obligations being
refinanced.
"PERMITTED RECEIVABLES TRANSACTION" shall mean any transaction
providing for the sale or financing of Accounts (other than between Qualified
Companies); PROVIDED, HOWEVER, that any such transaction shall be consummated
(a) on terms that include terms substantially as described on ANNEX B or as the
Majority Lenders may otherwise consent, such consent not to be unreasonably
withheld, and (b) pursuant to documentation in form and substance reasonably
satisfactory to Joint Lead Arrangers, as evidenced by their written approval
thereof.
"PERMITTED REFINANCING" shall mean, with respect to any Indebtedness or
Contingent Obligation, any refinancing thereof, PROVIDED, HOWEVER, that
(a) no Default or Event of Default shall have occurred and be
continuing or would arise therefrom;
(b) any such refinancing Indebtedness shall (i) not be on financial
and other terms that are materially more onerous in the aggregate to any
Company or Creditor than the Indebtedness or Contingent Obligation being
refinanced and shall not have defaults, rights or remedies more burdensome
to any Company or Creditor than the Indebtedness being refinanced, (ii) not
have a stated maturity or weighted average life that is shorter than (I)
with respect to the refinancing of the Existing Notes, six months after the
Final Maturity Date and (II) in each other case, that of the Indebtedness
or Contingent Obligation being refinanced (provided that the stated
maturity or weighted average life may be shorter if the stated maturity of
any principal payment (including any amortization payments) is not earlier
than (I) with
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respect to the refinancing of the Existing Notes, six months after the
Final Maturity Date and (II) in each other case, the earlier of (A) the
stated maturity in effect prior to such refinancing or (B) 90 days after
the Final Maturity Date), (iii) be (if the Indebtedness or Contingent
Obligation being refinanced is subordinated by its terms or by the terms of
any agreement or instrument relating to such Indebtedness or Contingent
Obligation) at least as subordinate to the Obligations as the Indebtedness
or Contingent Obligation being refinanced (and unsecured if the refinanced
Indebtedness is unsecured), and (iv) be in a principal amount that does not
exceed the principal amount so refinanced, PLUS accrued interest, PLUS the
amount of any reasonable premium required to be paid at such time to
refinance the Indebtedness, PLUS, in either case, the amount of fees and
reasonable expenses of any Company incurred in connection with such
refinancing;
(c) the Indebtedness to be refinanced is not outstanding more than 45
days after the date of the incurrence of the Indebtedness incurred to
effect the refinancing thereof; and
(d) the sole obligor on such refinancing Indebtedness or Contingent
Obligation shall be Borrower or the original obligor on such Indebtedness
or Contingent Obligation being refinanced; provided, HOWEVER, that (i) any
guarantor of the Indebtedness or Contingent Obligation being refinanced
shall be permitted to guarantee the refinancing Indebtedness or Contingent
Obligation and (ii) any Obligor shall be permitted to guarantee any such
refinancing of any other Obligor.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"PLEDGED COLLATERAL" shall mean all Property pledged pursuant to the
Security Agreement.
"PRIME RATE" shall mean the PER ANNUM rate of interest established from
time to time by Bank of America, N.A. (or any successor thereto) as its prime
rate, which rate may not be the lowest rate of interest charged by Bank of
America, N.A. to its customers.
"PRINCIPAL OFFICE" shall mean the principal office of Administrative
Agent, located on the Effective Date at 101 North Tryon Street, 15th Floor,
NC1-001-15-04, Charlotte, North Carolina 28255, Attention: Agency Services, or
such other office as may be designated by Administrative Agent.
"PRINCIPAL PAYMENT DATE" shall mean, with respect to any Term Loan,
each Quarterly Date or other date set forth on SCHEDULE 3.01(b) on which a
payment of principal is due with respect to such Term Loan.
"PRIOR LIENS" shall mean Liens which, pursuant to the provisions of any
Security Document, are or may be permitted to be superior to the Lien of such
Security Document.
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"PROCEEDING" shall mean any claim, counterclaim, action, judgment,
suit, hearing, governmental investigation, arbitration or proceeding, including
by or before any Governmental Authority and whether judicial or administrative.
"PROFIT PAYMENT AGREEMENT" shall mean any agreement to make any payment
the amount of which is, or the terms of payment of which are, in any respect
subject to or contingent upon the revenues, income, cash flow, earnings or
profits (or the like) of any Person or business.
"PRO FORMA BALANCE SHEET" see Section 8.02(E).
"PRO FORMA DATE" see Section 8.02(E).
"PROPERTY" shall mean any right, title or interest in or to property or
assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible and including Equity Interests or other ownership
interests of any Person.
"PURCHASE PRICE ADJUSTMENT AMOUNT" see Section 2.10(a)(vi).
"QUALIFIED CAPITAL STOCK" shall mean with respect to any Person any
Equity Interest of such Person which is not Disqualified Capital Stock.
"QUALIFIED COMPANY" shall mean Borrower and each Qualified Subsidiary.
"QUALIFIED JOINT VENTURE" shall mean (a) any Joint Venture described in
SCHEDULE 1.01(f) and (b) any additional Joint Venture that any Company may enter
into in accordance with Section 9.09(A)(k).
"QUALIFIED SUBSIDIARY" shall mean any Wholly Owned Subsidiary of
Borrower (other than any Receivables Co.) that is or is required to be a
Guarantor and a party to the Security Agreement. "QUARTER" shall mean each three
month period ending on March 31, June 30, September 30 and December 31.
"QUARTERLY DATES" shall mean the last Business Day of each Quarter in
each year, commencing with the last Business Day of the first Quarter after the
Closing Date; PROVIDED, HOWEVER, that solely for purposes of Sections 2.05(a)
and (b), the Quarterly Dates shall commence with the last Business Day of the
first Quarter after the Effective Date.
"R/C PERCENTAGE" shall mean, with respect to any Revolving Lender, the
ratio of (a) the amount of the Revolving Commitments of such Lender to (b) the
aggregate amount of the Revolving Commitments of all of the Lenders.
"R/C TERMINATION DATE" shall mean the date that is the sixth
anniversary of the Closing Date.
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"REAL PROPERTY" shall mean all right, title and interest of any Company
(including, without limitation, any leasehold estate) in and to a parcel of real
property owned or operated by any Company, whether by lease, license or other
use or occupancy agreement, together with, in each case, all improvements and
appurtenant fixtures, equipment, personal property, easements and other property
and rights incidental to the ownership, lease or operation thereof or thereon.
"RECEIVABLES CO." shall mean any special purpose Wholly-Owned
Subsidiary of Borrower organized after the Effective Date (or such other Person
agreed to by Joint Lead Arrangers) that purchases Accounts generated by any
Company in connection with a Permitted Receivables Transaction.
"REDEEM" shall mean redeem, repurchase, repay, defease or otherwise
acquire or retire for value; and "REDEMPTION" and "REDEEMED" have correlative
meanings.
"REFINANCE" shall mean refinance, renew, extend, replace, defease or
refund, in whole or in part, including successively; and "REFINANCING" and
"REFINANCED" have correlative meanings.
"REGISTER" see Section 2.08.
"REGULATION D" shall mean Regulation D (12 C.F.R. Part 204) of the
Board of Governors of the United States Federal Reserve System.
"REGULATIONS T, U AND X" shall mean, respectively, Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) and Regulation X (12 C.F.R.
Part 224) of the Board of Governors of the United States Federal Reserve System
(or any successor), as the same may be modified and supplemented and in effect
from time to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
after the Effective Date in United States Federal, state or foreign law or
regulations (including Regulation D) or the adoption or making after such date
of any interpretation, directive or request applying to a class of banks or
other financial institutions including such Lender of or under any federal,
state or foreign law or regulations (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) by any court or
governmental or monetary authority or any other regulatory agency with proper
authority, including non-governmental agencies or bodies, charged with the
interpretation or administration thereof or by the NAIC.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any time, the obligations of
Borrower then outstanding, or that may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by L/C Lender in
respect of any drawings under a Letter of Credit.
"RELATED PARTIES" see Section 11.01.
"RELATED PERSON" of any Person shall mean any other Person who
beneficially owns (a) 5% or more of the outstanding common stock of such Person
or (b) 5% or more of the Voting Equity Interests of such Person in each case,
excluding any Person (other than SmithKline Beecham plc
<PAGE>
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or related entities) that files a Schedule 13G with respect to such Person
pursuant to the Exchange Act (and is qualified to do so).
"RELEASE" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment.
"REPLACED LENDER" see Section 2.11.
"REPLACEMENT LENDER" see Section 2.11.
"REQUIRED PAYMENT" see Section 4.06.
"REQUIREMENT OF LAW" shall mean as to any Person, the Organic Documents
of such Person, and any Law or determination of an arbitrator or any
Governmental Authority, in each case applicable to or binding upon such Person
or any of its Property or to which such Person or any of its Property is
subject.
"RESERVE REQUIREMENT" shall mean, for any Interest Period for any LIBOR
Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the United States Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D).
"RESPONSIBLE OFFICER" shall mean the chief executive officer of
Borrower or the president or any vice president of Borrower and, with respect to
financial matters, the chief financial officer, treasurer, chief accounting
officer or corporate controller of Borrower.
"REVOLVING COMMITMENT" shall mean, for each Revolving Lender, the
obligation of such Lender to make Revolving Loans in an aggregate principal
amount at any one time outstanding up to but not exceeding the amount set
opposite the name of such Lender on ANNEX A under the caption "Revolving
Commitment" (as the same may be reduced from time to time pursuant to Section
2.04 or changed pursuant to Section 12.06(b)). The initial aggregate principal
amount of the sum of the Revolving Commitments of all Lenders is $250.0 million.
"REVOLVING FACILITY" shall mean the credit facility comprising the
Revolving Commitments.
"REVOLVING LENDERS" shall mean (a) on the Effective Date, the Lenders
having a Revolving Commitment on the signature pages hereof and (b) thereafter,
the Lenders from time to time holding Revolving Loans and a Revolving Commitment
after giving effect to any assignments thereof permitted by Section 12.06(b).
"REVOLVING LOANS" see Section 2.01(a).
"REVOLVING NOTES" shall mean the promissory notes substantially in the
form of EXHIBIT A-1.
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"SALE AND LEASEBACK TRANSACTION" shall mean any arrangement, directly
or indirectly, with any Person whereby it shall sell or transfer any Property
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such Property or other Property which it intends to use
for substantially the same purpose or purposes as the Property being sold or
transferred.
"S&P" shall mean Standard & Poor's, a division of The McGraw Hill
Companies.
"SBCL" shall mean collectively SBCL, Inc., a Delaware corporation and
SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation, and any
Other Assets (as defined in the SBCL Acquisition Agreement) purchased under the
SBCL Acquisition Agreement.
"SBCL ACQUISITION" shall mean the Acquisition by Borrower of SBCL
pursuant to the SBCL Acquisition Agreement and all other transactions
contemplated by the SBCL Acquisition Agreement.
"SBCL ACQUISITION AGREEMENT" shall mean the Stock and Asset Purchase
Agreement dated as of February 9, 1999 among Borrower, SmithKline Beecham plc
and SmithKline Beecham Corporation.
"SBCL FINANCIAL STATEMENTS" see Section 8.02(B).
"SECURITIES ACT" shall mean the United States Securities Act of 1933,
as amended, and all rules and regulations of the Commission promulgated
thereunder.
"SECURITY AGREEMENT" shall mean a Security Agreement substantially in
the form of EXHIBIT D among the Obligors and Administrative Agent, as the same
may be amended in accordance with the terms thereof and hereof or such other
agreements reasonably acceptable to Administrative Agent as shall be necessary
to comply with applicable Requirements of Law and effective to grant to
Administrative Agent (on behalf of the Creditors) a perfected first priority
security interest in the Pledged Collateral covered thereby.
"SECURITY DOCUMENTS" shall mean the Security Agreement, the Mortgages
and each other security document or pledge agreement required by applicable
local law to grant a valid, perfected security interest in any Property acquired
or developed pursuant to a Permitted Acquisition, and all UCC or other financing
statements or instruments of perfection required by this Agreement, the Security
Agreement or any Mortgage to be filed with respect to the security interests in
Property and fixtures created pursuant to the Security Agreement or any Mortgage
and any other document or instrument utilized to pledge as collateral for the
Obligations any Property of whatever kind or nature.
"SOLVENT" and "SOLVENCY" shall mean, for any Person on a particular
date, that on such date (a) the fair value of the Property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (b) the present fair salable value of
the assets of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured, (c) such Person does not intend to, and does not believe that it
will, incur debts and liabilities beyond such Person's ability to
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pay such debts and liabilities as they mature and (d) such Person is not engaged
in a business or a transaction, and is not about to engage in a business or a
transaction, for which such Person's Property would constitute an unreasonably
small capital.
"SUBORDINATED DEBT" shall mean Indebtedness of any Company that is
contractually subordinated to any other Indebtedness of such Company.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person and/or one or
more Subsidiaries of such Person. Unless the context clearly requires otherwise,
all references to any Subsidiary shall mean a Subsidiary of Borrower. All
references to any Subsidiary of Borrower on or after the Closing Date (both
before and after giving effect to any extension of credit made hereunder on or
after the Closing Date) shall include all those Persons which become
Subsidiaries of Borrower upon consummation of the SBCL Acquisition and at any
time thereafter. Unrestricted Subsidiaries are not Subsidiaries (and hence, not
a Company) for purposes of Section 9.
"SUPERMAJORITY LENDERS" shall mean (a) at any time prior to the Closing
Date, Lenders holding at least two-thirds of the aggregate amount of the
Commitments and (b) at any time after the Closing Date, Lenders holding at least
two-thirds of the sum of (without duplication) (i) the aggregate principal
amount of outstanding Loans, PLUS (ii) the aggregate amount of all L/C
Liabilities, PLUS (iii) the aggregate Unutilized Revolving Commitments then in
effect; PROVIDED, HOWEVER, that if any Lender shall be a Defaulting Lender at
such time, there shall be excluded from the determination of Supermajority
Lenders at such time the aggregate principal amount of the Loans owing to such
Lender (in its capacity as a Lender) and outstanding at such time.
"SUPERMAJORITY LENDERS OF THE AFFECTED CLASS" shall mean (a) at any
time prior to the Closing Date, Lenders holding at least two-thirds of the
aggregate amount of the Commitments of the applicable Term Facility which would
be affected by any modification, supplement or waiver contemplated by clause (f)
to the proviso to Section 12.04(i), and (b) at any time after the Closing Date,
Lenders holding at least two-thirds of the sum of the aggregate amount of the
outstanding Loans of the applicable Term Facility which would be affected by any
modification, supplement or waiver contemplated by clause (f) to the proviso to
Section 12.04(i).
"SUPPLEMENTAL INDENTURE" shall mean a supplemental indenture to the
Existing Indenture which eliminates all negative covenants and events of default
under the Existing Indenture.
"SURETY INSTRUMENTS" shall mean all letters of credit (including
standby and commercial), bankers' acceptances, bank guarantees, surety bonds and
similar instruments.
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"SWAP CONTRACT" shall mean any agreement (including any master
agreement and any schedule or agreement, whether or not in writing, relating to
any single transaction) that is an interest rate swap agreement, basis swap,
forward rate agreement, commodity swap, commodity option, equity or equity index
swap or option, bond option, interest rate option, foreign exchange agreement,
rate cap, collar or floor agreement, currency swap agreement, cross-currency
rate swap agreement, swaption, currency option or any other similar agreement
(including any option to enter into any of the foregoing) and is designed to
protect any Company against fluctuations in interest rates, currency exchange
rates, commodity prices or similar risks (including any Interest Rate Protection
Agreement entered into pursuant to Section 9.18).
"SWING LOAN COMMITMENT" shall mean the obligation of the Swing Loan
Lender to make or continue Swing Loans hereunder in an aggregate principal
amount up to but not exceeding $35.0 million, as the same may be reduced or
terminated pursuant to Section 2.04 or Section 10, it being understood that the
Swing Loan Commitment is part of the Revolving Commitment of the Swing Loan
Lender, rather than a separate, independent commitment.
"SWING LOAN LENDER" shall mean Bank of America, N.A. and its successors
and assigns in such capacity.
"SWING LOAN NOTES" shall mean the promissory notes substantially in the
form of EXHIBIT A-6.
"SWING LOANS" see Section 2.01(g).
"SYNDICATION AGENT" see the introduction hereto.
"TAX BENEFIT" see Section 5.06(f).
"TAXES" shall mean any and all taxes, imposts, duties, charges, fees,
levies or other similar charges or assessments, including income, gross
receipts, excise, real or personal property, sales, withholding, social
security, retirement, unemployment, occupation, use, service, license, net
worth, payroll, franchise, and transfer and recording, imposed by the Internal
Revenue Service or any taxing authority (whether domestic or foreign, including
any federal, state, U.S. possession, county, local or foreign government or any
subdivision or taxing agency thereof), whether computed on a separate,
consolidated, unitary, combined or any other basis, including interest, fines,
penalties or additions to tax attributable to or imposed on or with respect to
any such taxes, charges, fees, levies or other assessments.
"TAX RETURNS" see Section 8.09.
"TERM A FACILITY" shall mean the credit facility comprising the Term A
Facility Commitments and the Term A Facility Loans.
"TERM A FACILITY COMMITMENT" shall mean, for each Term A Facility
Lender, the obligation of such Lender to make a Term A Facility Loan in an
amount up to but not exceeding the amount set opposite the name of such Lender
on ANNEX A under the caption "Term A Facility
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Commitment" (as the same may be changed pursuant to Section 12.06(b)). The
initial aggregate principal amount of the sum of the Term A Facility Commitments
of all Lenders is $400.0 million.
"TERM A FACILITY LENDERS" shall mean (a) on the Effective Date, the
Lenders having Term A Facility Commitments on the signature pages hereof, and
(b) thereafter, the Lenders from time to time holding Term A Facility Loans and
Term A Facility Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b).
"TERM A FACILITY LOANS" see Section 2.01(c).
"TERM A FACILITY NOTES" shall mean the promissory notes substantially
in the form of Exhibit A-2.
"TERM B FACILITY" shall mean the credit facility comprising the Term B
Facility Commitments and the Term B Facility Loans.
"TERM B FACILITY COMMITMENT" shall mean, for each Term B Facility
Lender, the obligation of such Lender to make a Term B Facility Loan in an
amount up to but not exceeding the amount set opposite the name of such Lender
on ANNEX A under the caption "Term B Facility Commitment" (as the same may be
changed pursuant to Section 12.06(b)). The initial aggregate principal amount of
the sum of the Term B Facility Commitments of all Lenders is $325.0 million.
"TERM B FACILITY LENDERS" shall mean (a) on the Effective Date, the
Lenders having Term B Facility Commitments on the signature pages hereof, and
(b) thereafter, the Lenders from time to time holding Term B Facility Loans and
Term B Facility Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b).
"TERM B FACILITY LOANS" see Section 2.01(d).
"TERM B FACILITY NOTES" shall mean the promissory notes substantially
in the form of Exhibit A-3.
"TERM C FACILITY" shall mean the credit facility comprising the Term C
Facility Commitments and the Term C Facility Loans.
"TERM C FACILITY COMMITMENT" shall mean, for each Term C Facility
Lender, the obligation of such Lender to make a Term C Facility Loan in an
amount up to but not exceeding the amount set opposite the name of such Lender
on ANNEX A under the caption "Term C Facility Commitment" (as the same may be
changed pursuant to Section 12.06(b)). The initial aggregate principal amount of
the sum of the Term C Facility Commitments of all Lenders is $300.0 million.
"TERM C FACILITY LENDERS" shall mean (a) on the Effective Date, the
Lenders having Term C Facility Commitments on the signature pages hereof, and
(b) thereafter, the Lenders from time to time holding Term C Facility Loans and
Term C Facility Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b).
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"TERM C FACILITY LOANS" see Section 2.01(e).
"TERM C FACILITY NOTES" shall mean the promissory notes substantially
in the form of Exhibit A-4.
"TERM FACILITIES" shall mean the credit facilities comprising the
Capital Markets Facility, the Term A Facility, the Term B Facility and the Term
C Facility, collectively.
"TERM LOAN COMMITMENTS" shall mean the Term A Facility Commitments, the
Term B Facility Commitments, the Term C Facility Commitments and the Capital
Markets Facility Commitments, collectively.
"TERM LOAN LENDERS" shall mean the Term A Facility Lenders, the Term B
Facility Lenders, the Term C Facility Lenders and the Capital Markets Facility
Lenders, collectively.
"TERM LOAN NOTES" shall mean the Term A Facility Notes, the Term B
Facility Notes, the Term C Facility Notes and the Capital Markets Facility
Notes, collectively.
"TERM LOANS" shall mean the Term A Facility Loans, the Term B Facility
Loans, the Term C Facility Loans and the Capital Markets Facility Loans,
collectively.
"TEST DATE" shall mean, for any Financial Maintenance Covenant, the
last day of each fiscal quarter of Borrower included within any period set forth
in the table for such Financial Maintenance Covenant.
"TOTAL DEBT" shall mean, at any date, the aggregate amount of
Indebtedness of Consolidated Companies at such date PLUS the aggregate undrawn
face amount of all undrawn Letters of Credit or any other letter of credit of
Consolidated Companies at such date and LESS the aggregate amount of cash and
Cash Equivalents of Consolidated Companies at such date, in each case determined
on a consolidated basis in conformity with GAAP.
"TOTAL FUNDED INDEBTEDNESS" shall mean, at any date, the aggregate
amount of Funded Indebtedness of Consolidated Companies as of such date
determined on a consolidated basis in conformity with GAAP.
"TOTAL LEVERAGE RATIO" shall mean, for any Test Date, the ratio of (x)
the sum of (i) Total Debt at such Test Date, PLUS (ii) without duplication of
amounts included in clause (i), an amount equal to the aggregate cash proceeds
received by any Company from an unrelated third party (net of amounts repaid)
from the financing pursuant to any Permitted Receivables Transaction of Accounts
which are outstanding at such Test Date to (y) Consolidated EBITDA for the four
fiscal quarters ending on such Test Date. Calculations under clause (i) or under
clause (ii) of this definition shall be reduced by any escrowed or pledged cash
proceeds which effectively secure the Indebtedness or the obligations of any
Company under such Permitted Receivables Transaction to the extent not already
deducted in the calculation of Total Debt.
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"TRANSACTION DOCUMENTS" shall mean the SBCL Acquisition Agreement, the
Unsecured Note Documents (if any), this Agreement, all documents relating to the
Note Tender (if any) and the Note Defeasance (if any) and in each case all
documents related thereto and all exhibits, appendices, schedules and annexes to
any thereof.
"TRANSACTIONS" shall mean the financings and transactions to occur on
the Closing Date, including, the SBCL Acquisition, the Existing Credit
Facilities Repayment, the Note Tender (if any), the Note Defeasance (if any) and
the extensions of credit made hereunder on the Closing Date.
"TRIGGER DATE" see the definition of Applicable Margin.
"TYPE" see Section 1.03.
"UCC" shall mean the Uniform Commercial Code as in effect in the
applicable state or other jurisdiction.
"UNRESTRICTED SUBSIDIARY" shall mean each Non-Qualified Foreign
Subsidiary and each Subsidiary of a Non-Qualified Foreign Subsidiary, so long as
the net revenues of Consolidated Companies attributed to all Non-Qualified
Foreign Subsidiaries are less than 5% of the net revenues of Consolidated
Companies.
"UNSECURED NOTE DOCUMENTS" shall mean any Unsecured Notes Indenture and
all other documents relating thereto and delivered to Agents, as any such
agreement or document may be amended and in effect from time to time in
accordance with its terms and this Agreement.
"UNSECURED NOTES" shall mean Indebtedness incurred pursuant to Section
9.08(A)(j).
"UNSECURED NOTES INDENTURE" shall mean any indenture under which
Unsecured Notes are (and any Exchange Notes may be) issued.
"UNUTILIZED REVOLVING COMMITMENT" shall mean, for any Revolving Lender,
at any time, the excess of such Lender's Revolving Commitment at such time over
the sum of (a) the aggregate outstanding principal amount of Revolving Loans
made by such Lender and (b) such Lender's R/C Percentage of the aggregate amount
of L/C Liabilities at such time.
"VOTING CUMULATIVE PREFERRED STOCK" shall mean the voting cumulative
preferred stock of Borrower outstanding on the Effective Date pursuant to
documentation existing on the Effective Date.
"WHOLLY OWNED SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the Equity Interests
(other than, in the case of a corporation, directors' qualifying shares or
nominee shares required under applicable law) are directly or indirectly owned
or controlled by such Person and/or one or more Wholly Owned Subsidiaries of
such Person. Unless the context clearly requires otherwise, all references to
any Wholly Owned Subsidiary shall mean a Wholly Owned Subsidiary of Borrower.
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"WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part 1 of Subtitle E of Title IV of ERISA.
"WORKING CAPITAL" shall mean an amount determined for Consolidated
Companies equal to the sum of all current assets (other than cash and Cash
Equivalents) less the sum of all current liabilities (other than the current
portion of long-term Indebtedness).
1.02. ACCOUNTING TERMS AND DETERMINATIONS. Except as otherwise provided
in this Agreement, all computations and determinations as to accounting or
financial matters (including Financial Maintenance Covenants and other financial
covenants) shall be made in accordance with GAAP consistently applied for all
applicable periods, and all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP; PROVIDED, HOWEVER, that, if Borrower
notifies Joint Lead Arrangers that Borrower wishes to amend the calculation of
the Total Leverage Ratio for purposes of determining the Applicable Margins or
to amend any covenant in Section 9, in either case to eliminate the effect of
any change in GAAP (as to which Borrower shall give notice of such change to
Joint Lead Arrangers and the Lenders within a reasonable time after such change)
on the operation of such calculation or covenant (or if Joint Lead Arrangers
notify Borrower that the Majority Lenders wish to amend any such calculation or
covenant for such purpose), then such calculation or Borrower's compliance with
such covenant, as the case may be, shall be determined on the basis of GAAP in
effect immediately before the relevant change in GAAP became effective, until
either such notice is withdrawn or such calculation or covenant is amended in a
manner satisfactory to Borrower and the Majority Lenders. All financial
statements to be delivered pursuant to this Agreement shall be prepared in
accordance with GAAP.
1.03. CLASSES AND TYPES OF LOANS. Loans hereunder are distinguished by
"Class" and by "Type". The "CLASS" of a Loan (or of a Commitment to make a Loan)
refers to whether such Loan is a Revolving Loan, Swing Loan, Term A Facility
Loan, Term B Facility Loan, Term C Facility Loan or Capital Markets Facility
Loan each of which constitutes a Class. The "TYPE" of a Loan refers to whether
such Loan is an ABR Loan or a LIBOR Loan, each of which constitutes a Type.
Loans may be identified by both Class and Type.
1.04. RULES OF CONSTRUCTION. (a) In each Credit Document, unless the
context clearly requires otherwise (or such other Credit Document clearly
provides otherwise), references to (i) the plural include the singular, the
singular include the plural and the part include the whole; (ii) Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; (iii) agreements (including this Agreement), promissory notes and other
contractual instruments include subsequent amendments, assignments, and other
modifications thereto, but only to the extent such amendments, assignments or
other modifications thereto are not prohibited by their terms or the terms of
any Credit Document; (iv) statutes and related regulations include any
amendments of the same and any successor statutes and regulations; and (v) time
shall be a reference to New York City time.
(b) In each Credit Document, unless the context clearly requires
otherwise (or such other Credit Document clearly provides otherwise), (i)
"AMEND" shall mean "amend, restate, amend
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and restate, supplement or modify"; and "AMENDED," "AMENDING," and "AMENDMENT"
shall have meanings correlative to the foregoing; (ii) in the computation of
periods of time from a specified date to a later specified date, "FROM" shall
mean "from and including"; "TO" and "UNTIL" shall mean "to but excluding"; and
"THROUGH" shall mean "to and including"; (iii) "HEREOF," "HEREIN" and
"HEREUNDER" (and similar terms) in any Credit Document refer to such Credit
Document as a whole and not to any particular provision of such Credit Document;
(iv) "INCLUDING" (and similar terms) shall mean "including without limitation"
(and similarly for similar terms); (v) "OR" has the inclusive meaning
represented by the phrase "and/or"; (vi) "SATISFACTORY TO" any Creditor shall
mean in form, scope and substance and on terms and conditions satisfactory to
such Creditor; (vii) references to "THE DATE HEREOF" shall mean the date first
set forth above; (viii) "ASSET" and "PROPERTY" shall have the same meaning and
effect and refer to all tangible and intangible assets and property, whether
real, personal or mixed and of every type and description; and (ix) a "FISCAL
YEAR" or a "FISCAL QUARTER" are references to a fiscal year or fiscal quarter of
Borrower.
(c) In this Agreement unless the context clearly requires otherwise,
any reference to (i) an Annex, Exhibit or Schedule is to an Annex, Exhibit or
Schedule, as the case may be, attached to this Agreement and constituting a part
hereof, and (ii) a Section or other subdivision is to a Section or such other
subdivision of this Agreement.
Section 2. COMMITMENTS, LETTERS OF CREDIT, CONVERSIONS AND
CONTINUATIONS, FEES, REGISTER, PREPAYMENTS AND REPLACEMENT
OF LENDERS.
2.01. LOANS.
(a) REVOLVING LOANS. Each Revolving Lender severally agrees, on the
terms and conditions of this Agreement, to make revolving loans (the "REVOLVING
LOANS") to Borrower in Dollars during the period from and including the Closing
Date to but not including the R/C Termination Date in an aggregate principal
amount at any one time outstanding not exceeding the amount of the Revolving
Commitment of such Lender as in effect from time to time; PROVIDED, HOWEVER,
that in no event shall the sum of the aggregate principal amount of (without
duplication) all Revolving Loans then outstanding, PLUS the aggregate principal
amount of Swing Loans then outstanding, PLUS the aggregate amount of all L/C
Liabilities at any time exceed the aggregate amount of the Revolving Commitments
as in effect at such time. Subject to the terms and conditions of this
Agreement, during such period Borrower may borrow, repay and reborrow the amount
of the Revolving Commitments by means of ABR Loans and LIBOR Loans.
(b) CAPITAL MARKETS FACILITY LOANS. Each Capital Markets Facility
Lender severally agrees, on the terms and conditions of this Agreement, to make
a term loan ("CAPITAL MARKETS FACILITY LOANS") to Borrower in Dollars on the
Closing Date in an aggregate principal amount up to the Capital Markets Facility
Commitment of such Lender. Capital Markets Facility Loans that are repaid or
prepaid may not be reborrowed.
(c) TERM A FACILITY LOANS. Each Term A Facility Lender severally
agrees, on the terms and conditions of this Agreement, to make a term loan
("TERM A FACILITY LOANS") to Borrower
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in Dollars on the Closing Date in an aggregate principal amount up to the Term A
Facility Commitment of such Lender. Term A Facility Loans that are repaid or
prepaid may not be reborrowed.
(d) TERM B FACILITY LOANS. Each Term B Facility Lender severally
agrees, on the terms and conditions of this Agreement, to make a term loan
("TERM B FACILITY LOANS") to Borrower in Dollars on the Closing Date in an
aggregate principal amount up to the Term B Facility Commitment of such Lender.
Term B Facility Loans that are repaid or prepaid may not be reborrowed.
(e) TERM C FACILITY LOANS. Each Term C Facility Lender severally
agrees, on the terms and conditions of this Agreement, to make a term loan
("TERM C FACILITY LOANS") to Borrower in Dollars on the Closing Date in an
aggregate principal amount up to the Term C Facility Commitment of such Lender.
Term C Facility Loans that are repaid or prepaid may not be reborrowed.
(f) LIMIT ON LIBOR LOANS. No more than twelve separate Interest Periods
in respect of LIBOR Loans may be outstanding at any one time.
(g) SWING LOANS. Subject to the terms and conditions of this Agreement,
upon request of Borrower, the Swing Loan Lender agrees to make one or more loans
("SWING LOANS") to Borrower from time to time from and including the Closing
Date to but excluding the R/C Termination Date, in an amount not to exceed the
Swing Loan Commitment as then in effect. Prior to the R/C Termination Date,
Borrower may borrow, repay and reborrow Swing Loans up to the Swing Loan
Commitment in accordance with the terms of this Agreement. The Swing Loan Lender
shall not make any Swing Loans on or after the R/C Termination Date. No Swing
Loan shall be made if, after giving full effect to the requested Swing Loan, the
aggregate outstanding amount of Revolving Loans, PLUS the aggregate outstanding
amount of Swing Loans, PLUS the aggregate outstanding L/C Liabilities would
exceed the aggregate amount of the Revolving Commitments as in effect at such
time. All Swing Loans shall be made and maintained only as ABR Loans. The Swing
Loan Lender shall not make any Swing Loan after receiving a written notice from
Borrower or the Majority Revolving Lenders stating that a Default exists and is
continuing until such time as the Swing Loan Lender shall have received written
notice of (i) rescission of all such notices from the party or parties
originally delivering such notice, (ii) the waiver of such Default by the
Majority Lenders, or (iii) Administrative Agent's good faith determination that
such Default has ceased to exist. Swing Loans shall be made in minimum amounts
of $1.0 million and integral multiples of $100,000 above such amount.
Upon the occurrence of a Default, each Revolving Lender shall be deemed
to have purchased (and each Revolving Lender hereby irrevocably agrees to
purchase) an irrevocable participation in all outstanding Swing Loans, together
with all accrued interest thereon equal to such Lender's R/C Percentage thereof,
without any further action by or on behalf of the Swing Loan Lender, any other
Lender, Borrower or any other Person. Upon one Business Day's notice from the
Swing Loan Lender, each other Revolving Lender shall deliver to the Swing Loan
Lender an amount equal to its respective participation in such Swing Loan (as
determined pursuant to the immediately preceding sentence) in immediately
available funds. In order to evidence such participation, each Revolving Lender
agrees to enter into a participation agreement at the request of the Swing Loan
Lender in form and substance satisfactory to the Swing Loan Lender and the
Revolving Lender. If any Revolving Lender fails to make available to the Swing
Loan Lender the amount of such Revolving
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Lender's participation as provided in this paragraph, the Swing Loan Lender
shall be entitled to recover such amount on demand from such Revolving Lender,
together with interest thereon at the Federal Funds Rate until such amount is
paid in full in immediately available funds. In the event the Swing Loan Lender
receives a payment from any Obligor of any amount in which the Revolving Lenders
have purchased participations as provided in this paragraph, the Swing Loan
Lender shall promptly distribute to each Revolving Lender its PRO RATA share of
such payment. Notwithstanding anything herein to the contrary, each Revolving
Lender's obligation to purchase a participation in each unpaid Swing Loan shall
be absolute and unconditional and shall not be affected by any circumstances,
including, (1) any setoff, counterclaim, recoupment, defense or other right
which such Revolving Lender may now or hereafter have against the Swing Loan
Lender, Borrower or any other Person for any reason whatsoever, (2) the
occurrence or continuation of a Default or an Event of Default, (3) the
occurrence of any Material Adverse Change, (4) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing, except that
no Revolving Lender need participate in any Swing Loan made by the Swing Loan
Lender in violation of the penultimate sentence of the first paragraph of
Section 2.01(g).
2.02. BORROWINGS. Borrower shall give Administrative Agent notice of
each borrowing hereunder as provided in Section 4.05. The form of such notice of
borrowing shall be substantially in the form of EXHIBIT G. Not later than 11:00
a.m. New York City time on the date specified for each borrowing hereunder, each
Lender shall make available the amount of the Loan or Loans to be made by it on
such date to Administrative Agent, at an account specified by Administrative
Agent maintained at the Principal Office, in immediately available funds, for
the account of Borrower. Each borrowing of Revolving Loans shall be made by each
Revolving Lender PRO RATA based on its R/C Percentage. The amounts so received
by Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to Borrower by depositing the same, in immediately
available funds, in an account of Borrower maintained with Administrative Agent
at the Principal Office designated by Borrower.
2.03. LETTERS OF CREDIT. Subject to the terms and conditions hereof,
the Revolving Commitments may be utilized, upon the request of Borrower, in
addition to the Revolving Loans provided for by Section 2.01(a), for standby and
commercial documentary letters of credit (herein collectively called "LETTERS OF
CREDIT") issued by L/C Lender for the account of any Obligor (PROVIDED, that
Borrower shall be a co-applicant (and jointly and severally liable) with respect
to each Letter of Credit issued for the account of any Subsidiary); PROVIDED,
HOWEVER, that in no event shall (i) the aggregate amount of all L/C Liabilities,
PLUS the aggregate principal amount of the Revolving Loans then outstanding,
PLUS the aggregate principal amount of Swing Loans then outstanding exceed at
any time the Revolving Commitments as in effect at such time, (ii) the sum of
the aggregate principal amount of Revolving Loans then outstanding made by any
Revolving Lender, PLUS such Lender's R/C Percentage of the aggregate principal
amount of Swing Loans then outstanding, PLUS such Lender's R/C Percentage of the
aggregate amount of all L/C Liabilities exceed such Lender's Revolving
Commitment as in effect at such time, (iii) the outstanding aggregate amount of
all L/C Liabilities exceed $75.0 million, (iv) the face amount of any Letter of
Credit be less than $250,000, (v) the expiration date of any Letter of Credit
extend beyond the earlier of (x) the fifth Business Day preceding the R/C
Termination Date and (y) the date twelve months following the date of such
issuance for standby Letters of
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Credit or 180 days after the date of such issuance for commercial documentary
Letters of Credit, unless the Majority Revolving Lenders have approved such
expiry date in writing (but never beyond the fifth Business Day prior to the R/C
Termination Date); PROVIDED, HOWEVER, that any standby Letter of Credit may,
with the prior written approval of L/C Lender (such approval not to be
unreasonably withheld or delayed), be automatically extendible for periods of up
to one year (but never beyond the fifth Business Day preceding the R/C
Termination Date) so long as such Letter of Credit provides that L/C Lender
retains an option satisfactory to L/C Lender to terminate such Letter of Credit
prior to each extension date, unless all of the Revolving Lenders have approved
such expiry date in writing, (vi) L/C Lender issue any Letter of Credit after it
has received notice from Borrower or the Majority Revolving Lenders stating that
a Default exists until such time as L/C Lender shall have received written
notice of (x) rescission of such notice from the Majority Revolving Lenders, (y)
waiver of such Default in accordance with this Agreement or (z) Administrative
Agent's good faith determination that such Default has ceased to exist, or (vii)
a commercial letter of credit be issued in a currency other than Dollars or at a
tenor other than sight. The following additional provisions shall apply to
Letters of Credit:
(a) Borrower shall give Administrative Agent at least three Business
Days' irrevocable prior notice (effective upon receipt) pursuant to a
Letter of Credit application satisfactory to L/C Lender specifying the date
(which shall be no later than thirty days preceding the R/C Termination
Date) each Letter of Credit is to be issued and describing in reasonable
detail the proposed terms of such Letter of Credit (including the
beneficiary thereof) (including whether such Letter of Credit is to be a
commercial Letter of Credit or a standby Letter of Credit). Upon receipt of
any such notice, Administrative Agent shall advise L/C Lender of the
contents thereof. Each Lender hereby authorizes L/C Lender to issue, and
perform its obligations under, Letters of Credit. Letters of Credit shall
be issued in accordance with the customary procedures of L/C Lender, which
may include an application for Letters of Credit. L/C Lender may refuse to
issue any Letter of Credit the contents of which are not reasonably
satisfactory to it. If there is any conflict between the procedures or any
Letter of Credit application required by L/C Lender and this Agreement,
this Agreement shall govern.
(b) On each day during the period commencing with the issuance by L/C
Lender of any Letter of Credit and until such Letter of Credit shall have
expired or been terminated, the Revolving Commitment of each Revolving
Lender shall be deemed to be utilized for all purposes hereof in an amount
equal to such Lender's R/C Percentage of the then undrawn face amount of
such Letter of Credit plus the amount of any unreimbursed drawings
thereunder. Each Revolving Lender (other than L/C Lender) severally agrees
that, upon the issuance of any Letter of Credit hereunder, it shall
automatically acquire a participation in L/C Lender's obligation to fund
drawings and rights under such Letter of Credit in an amount equal to such
Lender's R/C Percentage of such obligations and rights, and each Revolving
Lender (other than L/C Lender) thereby shall absolutely, unconditionally
and irrevocably assume, as primary obligor and not as surety, and shall be
unconditionally obligated to L/C Lender to pay and discharge when due, its
R/C Percentage of L/C Lender's obligation to fund drawings under such
Letter of Credit. L/C Lender shall be deemed to hold an L/C Liability in an
amount equal to its retained interest in the related Letter of Credit after
giving effect to such acquisition by the Revolving Lenders other than L/C
Lender of their participation interests.
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(c) In the event that L/C Lender has determined to honor a drawing
under a Letter of Credit, L/C Lender shall promptly notify Borrower
(through Administrative Agent) of the amount paid by L/C Lender and the
date on which payment is to be made to such beneficiary. Borrower hereby
unconditionally agrees to pay and reimburse L/C Lender for the amount of
payment under such Letter of Credit, together with interest thereon at the
Alternate Base Rate plus the Applicable Margin applicable to Revolving
Loans from the date payment was made to such beneficiary to the date on
which payment is due, not later than the next Business Day after the date
on which Borrower receives such notice from L/C Lender (or the second
Business Day thereafter if such notice is received on a date that is not a
Business Day or after 11:00 a.m. New York City time on a Business Day). Any
such payment due from Borrower and not paid on the required date shall bear
interest at rates specified in Section 3.02(b).
(d) Forthwith upon its receipt of a notice referred to in clause (c)
of this Section 2.03, Borrower shall advise L/C Lender whether or not
Borrower intends to borrow hereunder to finance its obligation to reimburse
L/C Lender for the amount of the related demand for payment and, if it
does, submit a notice of such borrowing as provided in Section 4.05. In the
event that Borrower fails to so advise Administrative Agent, or if Borrower
fails to reimburse L/C Lender for a demand for payment under a Letter of
Credit by the next Business Day after the date of such notice,
Administrative Agent shall give each Revolving Lender prompt notice of the
amount of the demand for payment, specifying such Lender's R/C Percentage
of the amount of the related demand for payment.
(e) Each Revolving Lender (other than L/C Lender) shall pay to
Administrative Agent for account of L/C Lender at the Principal Office in
Dollars and in immediately available funds, the amount of such Lender's R/C
Percentage of any payment under a Letter of Credit upon not less than one
Business Day's actual notice by L/C Lender (through Administrative Agent)
to such Revolving Lender requesting such payment and specifying such
amount. Subject to the proviso to the last paragraph of this Section 2.03,
each such Revolving Lender's obligation to make such payments to
Administrative Agent for the account of L/C Lender under this clause (e),
and L/C Lender's right to receive the same, shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including (i) the failure of any other Revolving Lender to make its payment
under this clause (e), (ii) the financial condition of Borrower or the
existence of any Default or (iii) the termination of the Commitments. Each
such payment to L/C Lender shall be made without any offset, abatement,
withholding or reduction whatsoever.
(f) Upon the making of each payment by a Revolving Lender to L/C Lender
pursuant to clause (e) above in respect of any Letter of Credit, such
Lender shall, automatically and without any further action on the part of
Administrative Agent, L/C Lender or such Lender, acquire (i) a
participation in an amount equal to such payment in the Reimbursement
Obligation owing to L/C Lender by Borrower hereunder and under the L/C
Documents relating to such Letter of Credit and (ii) a participation in a
percentage equal to such Lender's R/C Percentage in any interest or other
amounts payable by Borrower hereunder and under such L/C Documents in
respect of such Reimbursement Obligation. Upon receipt by L/C Lender from
or for the account of Borrower of any payment in respect of any
Reimbursement Obligation or
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any such interest or other amounts (including by way of setoff or
application of proceeds of any collateral security) L/C Lender shall
promptly pay to Administrative Agent for the account of each Revolving
Lender which has satisfied its obligations under clause (e) above, such
Revolving Lender's R/C Percentage of such payment, each such payment by L/C
Lender to be made in Dollars. In the event any payment received by L/C
Lender and so paid to the Revolving Lenders hereunder is rescinded or must
otherwise be returned by L/C Lender, each Revolving Lender shall, upon the
request of L/C Lender (through Administrative Agent), repay to L/C Lender
(through Administrative Agent) the amount of such payment paid to such
Lender, with interest at the rate specified in clause (i) of this Section
2.03.
(g) Borrower shall pay to Administrative Agent for the account of L/C
Lender in respect of each Letter of Credit a letter of credit commission in
an amount (not less than $500) equal to (x) the rate PER ANNUM equal to the
Applicable Margin for Revolving Loans that are LIBOR Loans in effect from
time to time, multiplied by (y) the daily average undrawn face amount of
such Letter of Credit for the period from and including the date of
issuance of such Letter of Credit (i) in the case of a Letter of Credit
which expires in accordance with its terms, to and including such
expiration date and (ii) in the case of a Letter of Credit which is drawn
in full or is otherwise terminated other than on the stated expiration date
of such Letter of Credit, to but excluding the date such Letter of Credit
is drawn in full or is terminated, such fee to be non-refundable and to be
paid in arrears quarterly, on each Quarterly Date, and on the earlier of
the R/C Termination Date or the date of the termination of the Revolving
Commitment or the date of such termination, expiration or the Business Day
subsequent to notice of a drawing. L/C Lender shall pay to Administrative
Agent for the account of each Revolving Lender (other than L/C Lender),
from time to time at reasonable intervals (but in any event at least
quarterly), but only to the extent actually received from Borrower, an
amount equal to such Lender's R/C Percentage of all letter of credit
commissions referred to in the first sentence of this clause (g). In
addition, Borrower shall pay to Administrative Agent for account of L/C
Lender only in respect of each Letter of Credit a letter of credit issuance
fee in an amount equal to 0.03125% quarterly in arrears multiplied by the
face amount from the issue date through the expiry date of such Letter of
Credit (but in no event less than $500 per Letter of Credit), such amount
to be payable on the date of issuance of such Letter of Credit, plus all
charges, costs and expenses in the amounts customarily charged by L/C
Lender from time to time in like circumstances with respect to the
issuance, amendment or transfer of each Letter of Credit and drawings and
other transactions relating thereto.
(h) Promptly following the end of each calendar quarter, L/C Lender
shall deliver (through Administrative Agent) to each Revolving Lender and
Borrower a notice describing the aggregate amount of all Letters of Credit
outstanding at the end of such quarter. Upon the request of any Revolving
Lender from time to time, L/C Lender shall deliver to such Lender and
Borrower any other information reasonably requested by such Lender with
respect to each Letter of Credit then outstanding.
(i) To the extent that any Revolving Lender fails to pay an amount
required to be paid pursuant to clause (e) or (f) of this Section 2.03 on
the due date therefor, such Lender shall pay interest to L/C Lender
(through Administrative Agent) on such amount from and
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including such due date to but excluding the date such payment is made at a
rate PER ANNUM equal to the Federal Funds Rate (as in effect from time to
time).
(j) The issuance by L/C Lender of any material modification or
supplement to any Letter of Credit hereunder that would extend the expiry
date or increase the face amount thereof shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (x) the respective Letter of Credit affected
thereby would have complied with such conditions had it originally been
issued hereunder in such modified or supplemented form or (y) the Majority
Revolving Lenders (or all of the Revolving Lenders to the extent required
by Section 12.04 shall) have consented thereto.
(k) Notwithstanding the foregoing, L/C Lender shall not be under any
obligation to issue any Letter of Credit if at the time of such issuance,
any order, judgment or decree of any Governmental Authority or arbitrator
shall purport by its terms to enjoin or restrain L/C Lender from issuing
such Letter of Credit or any requirement of law applicable to L/C Lender or
any request or directive (whether or not having the force of law) from any
Governmental Authority shall prohibit the issuance of letters of credit
generally or such Letter of Credit in particular or shall impose upon L/C
Lender with respect to such Letter of Credit any restriction or reserve or
capital requirement (for which L/C Lender is not otherwise compensated) not
in effect on the date hereof. At any time that L/C Lender shall not be
under any obligation to issue Letters of Credit pursuant to this paragraph
(k), L/C Lender may be replaced by Borrower with another Lender reasonably
acceptable to Administrative Agent upon notice to L/C Lender and
Administrative Agent and acceptance of such appointment by such successor
L/C/ Lender. Upon any such replacement, Administrative Agent shall notify
the Lenders of any such replacement of L/C Lender and the replacement L/C
Lender shall agree to be bound by the applicable provisions of this
Agreement. At the time any such replacement shall become effective,
Borrower shall pay all unpaid fees accrued for the account of the replaced
L/C Lender pursuant to Section 2.03(g). From and after the effective date
of any such replacement, (i) the successor L/C Lender shall have all the
rights and obligations of L/C Lender under this Agreement with respect to
Letters of Credit to be issued thereafter and (ii) references herein to the
term "L/C Lender" shall be deemed to refer to such successor or to any
previous L/C Lender, or to such successor and all previous L/C Lenders, as
the context shall require. After the replacement of an L/C Lender
hereunder, the replaced L/C Lender shall remain a party hereto and shall
continue to have all the rights and obligations of an L/C Lender under this
Agreement with respect to Letters of Credit issued by it prior to such
replacement, but shall not be required to issue additional Letters of
Credit.
The obligations of Borrower under this Agreement and any L/C Document to
reimburse L/C Lender for a drawing under a Letter of Credit, and to repay any
drawing under a Letter of Credit converted into Revolving Loans, shall be
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement and each such other L/C Document under all
circumstances, including the following: (i) any lack of validity or
enforceability of this Agreement or any L/C Document; (ii) the existence of any
claim, set-off, defense or other right that Borrower may have at any time
against any beneficiary or any transferee of any Letter of Credit (or any Person
for whom any
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such beneficiary or any such transferee may be acting), L/C Lender or any other
Person, whether in connection with this Agreement, the transactions contemplated
hereby or by the L/C Documents or any unrelated transaction; (iii) any draft,
demand, certificate or other document presented under any Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; or any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under any Letter of Credit; or any defense based upon the failure of
any drawing under a Letter of Credit to conform to the terms of the Letter of
Credit or any non-application or misapplication by the beneficiary of the
proceeds of such drawing; or (iv) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, Borrower or a Guarantor; PROVIDED, HOWEVER, that neither Borrower
nor any Revolving Lender shall be obligated to reimburse L/C Lender for any
wrongful payment finally determined by a court of competent jurisdiction to have
been made by L/C Lender as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of L/C Lender. To the extent that any
provision of any L/C Document is inconsistent with the provisions of this
Section 2.03, the provisions of this Section 2.03 shall control.
(l) Each letter of credit set forth on SCHEDULE 2.03(l) hereto
outstanding on the Closing Date shall be deemed to have been issued by L/C
Lender hereunder on the Closing Date.
2.04. TERMINATION AND REDUCTIONS OF COMMITMENTS. (a)(i) The Commitments
shall be automatically and permanently terminated on September 30, 1999 if the
Closing Date does not occur on or prior to such date.
(ii) The Term Loan Commitments shall be reduced prior to the initial
extensions of credit hereunder dollar-for-dollar by an amount equal to (1) the
gross proceeds from any Debt Issuance contemplated by Section 9.08(A)(j) on or
prior to the Closing Date (excluding gross proceeds in excess of $300,000,000
and less than $325,000,001), (2) the gross proceeds from any Debt Issuance
contemplated by Section 9.08(A)(i) on or prior to the Closing Date and, without
duplication of such amount, an amount equal to the aggregate cash proceeds
received by any Company on or prior to the Closing Date from an unrelated third
party (net of amounts repaid and expenses related thereto) from the financing
pursuant to any Permitted Receivables Transaction of Accounts which are
outstanding at the date of determination, and (3) except to the extent that
Borrower has consummated the Note Defeasance, the aggregate principal amount of
the Existing Notes outstanding on the Closing Date, with any such reduction (A)
pursuant to clause (a)(ii)(1) or clause (a)(ii)(3) being applied FIRST to the
Capital Markets Facility Commitments, and SECOND, after the Capital Markets
Facility Commitments have been reduced to zero, to the Commitments under the
other Term Facilities pro RATA, and (B) pursuant to clause (a)(ii)(2) being
applied FIRST to the Term A Facility Commitments, and SECOND, after the Term A
Facility Commitments have been reduced to zero, to the Commitments under the
other Term Facilities PRO RATA. In determining the aggregate cash proceeds
received by any Company from the financing of any Accounts pursuant to any
Permitted Receivables Transaction, such amount shall be reduced by any escrowed
or pledged cash proceeds which effectively secure the obligations of any Company
under such Permitted Receivables Transaction.
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(iii) The aggregate amount of the Revolving Commitments shall be
automatically and permanently reduced to zero on the R/C Termination Date.
(iv) The aggregate amount of the Revolving Commitments shall be
permanently reduced on the date any prepayments required pursuant to Section
2.10(a) are made in the amount specified in Section 2.10(b)(ii).
(v) The aggregate amount of the Term Loan Commitments shall be
automatically and permanently reduced to zero immediately after the making of
the Term Loans on the Closing Date.
(b) Borrower shall have the right at any time or from time to time
(without premium or penalty except breakage costs (if any) pursuant to Section
5.05 ) (i) so long as no Revolving Loans or L/C Liabilities will be outstanding
as of the date specified for termination, to terminate the Revolving Commitments
in their entirety, and (ii) to reduce the aggregate amount of the Unutilized
Revolving Commitments (which shall be PRO RATA among the Revolving Lenders);
PROVIDED, HOWEVER, that (x) Borrower shall give notice of each such termination
or reduction as provided in Section 4.05, and (y) each partial reduction shall
be in an aggregate amount at least equal to $10.0 million (or a larger multiple
of $5.0 million in excess thereof) or, if less, the remaining Unutilized
Revolving Commitments.
(c) Any Commitment once terminated or reduced may not be reinstated.
2.05. FEES. (a) Borrower shall pay to Administrative Agent for the
account of each Revolving Lender a commitment fee on the daily average amount of
such Lender's Unutilized Revolving Commitment, for the period from and including
the Effective Date to but not including the earlier of the date such Revolving
Commitment is terminated and the R/C Termination Date, at a rate equal to the
Applicable R/C Fee Percentage. Any accrued commitment fee under this Section
2.05(a) shall be payable in arrears on the Closing Date, on each Quarterly Date
after receipt of an invoice delivered by Administrative Agent and on the earlier
of the date the Revolving Commitments are terminated or expire and the R/C
Termination Date.
(b) Borrower shall pay to Administrative Agent for the account of each
Term Loan Lender a commitment fee on the amount of such Lender's Term Loan
Commitment, for the period from and including the Effective Date to but not
including the Closing Date, at a rate equal to 0.50% PER ANNUM. Any accrued
commitment fee under this Section 2.05(b) shall be payable in arrears on the
Closing Date, on each Quarterly Date after receipt of an invoice delivered by
Administrative Agent and on the earlier of the date the Term Loan Commitments
are terminated or expire and on the Closing Date.
(c) Borrower shall pay to Administrative Agent for its own account the
annual administrative fee pursuant to the Fee Letter.
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(d) Notwithstanding Section 2.05(b) or (c), no commitment fee shall
accrue on any of the Commitments of a Defaulting Lender for any period of time
during which such Lender shall be a Defaulting Lender.
2.06. LENDING OFFICES. The Loans of each Type made by each Lender shall
be made and maintained at such Lender's Applicable Lending Office for Loans of
such Type.
2.07. SEVERAL OBLIGATIONS OF LENDERS. The failure of any Lender to make
any Loan to be made by it on the date specified therefor shall not relieve any
other Lender of its obligation to make its Loan on such date, but neither any
Lender nor Administrative Agent shall be responsible for the failure of any
other Lender to make a Loan to be made by such other Lender, and no Lender shall
have any obligation to Administrative Agent or any other Lender for the failure
by such Lender to make any Loan required to be made by such Lender. No Revolving
Lender will be responsible for the failure of any other Lender to fund its
participation in Swing Loans or Letters of Credit.
2.08. NOTES; REGISTER. (a) At the request of any Lender, its Loans of a
particular Class shall be evidenced by a promissory note, dated the Closing
Date, payable to such Lender (or its nominee) and otherwise duly completed,
substantially in the form of EXHIBIT A-1, A-2, A-3, A-4, A-5 and A-6, for such
Lender's Revolving Loans, Term A Facility Loans, Term B Facility Loans, Term C
Facility Loans, Capital Markets Facility Loans and Swing Loans, respectively.
(b) The date, amount, Type, interest rate and duration of the Interest
Period (if applicable) of each Loan of each Class made by each Lender to
Borrower and each payment made on account of the principal thereof, shall be
recorded by such Lender (or its nominee) on its books and, prior to any transfer
of any Note evidencing the Loans of such Class held by it, endorsed by such
Lender (or its nominee) on the schedule attached to such Note or any
continuation thereof; PROVIDED, HOWEVER, that the failure of such Lender (or its
nominee) to make any such recordation or endorsement or any error in any such
recordation or endorsement shall not affect the obligations of Borrower to make
a payment when due of any amount owing hereunder or under such Note.
(c) Borrower hereby designates Administrative Agent to serve as its
agent, solely for purposes of this Section 2.08, to maintain a register (the
"REGISTER") on which Administrative Agent will record the name and address of
each Lender, the Commitment from time to time of each of the Lenders, the
principal amount of the Loans made by each of the Lenders and each repayment in
respect of the principal amount of the Loans of each Lender and assignments and
transfers of Loans and Notes pursuant to Section 12.06(b). Failure to make any
such recordation or any error in such recordation shall not affect Borrower's
obligations in respect of such Loans. The entries in the Register shall be
conclusive, in the absence of manifest error, and the parties hereto shall treat
each Person whose name is recorded in the Register as the owner of a Loan, a
Note or other obligation hereunder as the owner thereof for the purposes of
receiving principal and interest and all other purposes, notwithstanding any
notice to the contrary. The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
2.09. OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF LOANS.
Subject to Section 4.04, Borrower shall have the right to prepay Loans, or to
Convert Loans of one Type into
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Loans of another Type or to Continue Loans of one Type as Loans of the same
Type, at any time or from time to time. Borrower shall give Administrative Agent
notice of each such prepayment, Conversion or Continuation as provided in
Section 4.05 (and, upon the date specified in any such notice of prepayment, the
amount to be prepaid shall become due and payable hereunder). Each notice of
Conversion or Continuation shall be substantially in the form of EXHIBIT H. If
LIBOR Loans are prepaid or Converted other than on the last day of an Interest
Period, Borrower shall at such time pay all expenses and costs required by
Section 5.05. Notwithstanding the foregoing, and without limiting the rights and
remedies of the Lenders under Section 10, in the event that any Event of Default
shall have occurred and be continuing, Administrative Agent may (and at the
request of the Majority Lenders shall) suspend the right of Borrower to Convert
any Loan into a LIBOR Loan, or to Continue any Loan as a LIBOR Loan, in which
event all Loans shall be Converted (on the last day(s) of the respective
Interest Periods therefor) or Continued, as the case may be, as ABR Loans.
Prepayments of the Term Loans pursuant to this Section 2.09 shall be applied PRO
RATA among the Term Facilities based upon the remaining unpaid amounts thereof,
except that, at the sole election of Borrower, up to $25.0 million of the Term C
Facility Loans may be prepaid without prepaying any other Term Loans if such
prepayment is made within five Business Days of the Closing Date; with any
application (A) to the Term A Facility to be applied PRO RATA among the
remaining Amortization Payments thereof based upon the remaining unpaid amounts
thereof and (B) to each of the other Term Facilities to be applied in inverse
order of maturity of the remaining Amortization Payments thereof.
Notwithstanding the foregoing, any holder of Term B Facility Loans or
Term C Facility Loans at its sole discretion may, with respect to any optional
prepayment, so long as any Term A Facility Loans are then outstanding (after
giving effect to the application of such required prepayment to the Term A
Facility Loans), elect by written notice provided to Administrative Agent not to
have all or any amount of any such required prepayments applied to such holder's
Term B Facility Loans or Term C Facility Loans, as the case may be, in which
case the aggregate amount so declined shall, at the option of Borrower, either
be retained by Borrower or be applied PRO RATA to the remaining Amortization
Payments of the Term A Facility; PROVIDED, HOWEVER, that to the extent that the
aggregate principal amount of the Term A Facility Loans after giving effect to
such optional prepayment is less than the aggregate amount so declined by the
holders of the Term B Facility Loans and Term C Facility Loans, such amount so
declined shall be allocated between the declining holders of the Term B Facility
Loans and Term C Facility Loans PRO RATA based on the aggregate amount declined
by each such holder.
2.10. MANDATORY PREPAYMENT AND COMMITMENT REDUCTIONS. (a) Borrower
shall prepay the Loans (and/or reduce Commitments) as follows (each such
prepayment (and/or Commitment reduction) to be effected in each case in the
manner, order and to the extent specified in subsection (b) below of this
Section 2.10):
(i) CASUALTY EVENTS. Within five Business Days after any Company
receives any Net Available Proceeds from any Casualty Event, in an
aggregate principal amount equal to 100% of such Net Available Proceeds;
PROVIDED, HOWEVER, that
(x) if no Default or Event of Default then exists or would arise
therefrom, the Net Available Proceeds thereof shall not be required to
be so applied on such date to
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the extent that Borrower has delivered an Officers' Certificate to
Administrative Agent on or prior to such date stating that such
proceeds shall be used to fund the substitution of Property used or
usable in the business of the Companies or repair, replace or restore
the Property in respect of which such Casualty Event has occurred, in
each case within one year following the date of the receipt of such Net
Available Proceeds,
(y) all such Net Available Proceeds in excess of the remainder of
(A) $20.0 million in the aggregate for all such Casualty Events (and
not reinvested within five Business Days of receipt in accordance with
clause (x) of this Section 2.10(a)(i)) MINUS (B) the amount not then
held in the Collateral Account by virtue of Section 2.10(a)(iv)(y)
shall be held in the Collateral Account and released therefrom only in
accordance with the terms of the Security Agreement, and
(z) if all or any portion of such Net Available Proceeds not
required to be applied to the prepayment of Loans pursuant to the
preceding proviso (x) is not so used within one year after the date of
the receipt of such Net Available Proceeds, such remaining portion
shall be applied on the last day of such period as specified in Section
2.10(b).
(ii) EQUITY ISSUANCE. Within three Business Days of any Equity Issuance
on or after the Closing Date, in an aggregate principal amount equal to 50%
(or, to the extent required to be applied to the Capital Markets Facility,
100%) of the Net Available Proceeds of such Equity Issuance.
(iii) DEBT ISSUANCE. (A) Within three (or five the first time required)
Business Days of any Debt Issuance on or after the Closing Date pursuant to
Section 9.08(A)(i) or 9.08(A)(j) (other than any Debt Issuance on the
Closing Date pursuant to Section 9.08(A)(j) to the extent that Commitments
have been reduced pursuant to Section 2.04), in an aggregate principal
amount equal to 100% of the remainder of the Net Available Proceeds of such
Debt Issuance (not applied to make a voluntary prepayment of Term Loans
pursuant to Section 2.09) less, so long as no Default or Event of Default
then exists or would arise therefrom, the amount of such Net Available
Proceeds applied within 45 days of receipt thereof to any Permitted
Refinancings of the Existing Notes or any Indebtedness incurred under such
clauses (it being understood that applications pursuant to this Section
2.10(a)(iii) shall not be duplicative of Section 2.10(a)(iv) below), and
(B) within five Business Days of the Closing Date in an amount equal to the
gross proceeds of any Debt Issuance described in Section 9.08(A)(j)
consummated prior to the Closing Date in excess of $300,000,000 and less
than $325,000,001 (and not applied to make a voluntary prepayment of Term
Loans under Section 2.09).
(iv) DISPOSITION EVENTS. Within five Business Days after receipt by any
Company of any Net Available Proceeds from any Disposition Event under
Section 9.06(g), (n), (p) or (q), in an aggregate principal amount equal to
100% of the Net Available Proceeds from such Disposition Event (it being
understood that applications pursuant to this Section 2.10(a)(iv) shall not
be duplicative of Section 2.10(a)(iii) above); PROVIDED, HOWEVER, that
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(x) the Net Available Proceeds from any Disposition Event
permitted by Sections 9.06(g), (n), (p) and (q) shall not be required
to be applied as provided herein on such date if (1) no Default or
Event of Default then exists or would arise therefrom, and (2) Borrower
delivers an Officers' Certificate to Administrative Agent on or prior
to such date stating that such Net Available Proceeds shall be
reinvested in capital assets of (A) if such Disposition Event was
effected by any Obligor, any Obligor and (B) if such Disposition Event
was effected by any other Company, any Company (other than a
Receivables Co.), in each case within one year following the date of
such Disposition Event (which certificate shall set forth the estimates
of the proceeds to be so expended),
(y) all such Net Available Proceeds in excess of the remainder of
(A) $20.0 million in the aggregate for all such Disposition Events (and
not reinvested within five Business Days of receipt in accordance with
clause (x) of this Section 2.10(a)(iv)) MINUS (B) the amount not then
held in the Collateral Account by virtue of Section 2.10(a)(i)(y) shall
be held in the Collateral Account and released therefrom only in
accordance with the terms of the Security Agreement, and
(z) if all or any portion of such Net Available Proceeds which
are permitted to be applied to reinvestment pursuant to the terms of
this Section 2.10(a)(iv) is not so used within such one year period,
such remaining portion shall be applied on the last day of such period
(or such earlier date as Borrower determines not to reinvest any
portion thereof) as specified in Section 2.10(b) (it being understood
that the foregoing shall in no way affect the obligation of any Company
to obtain the consent of the Majority Lenders if required pursuant to
this Agreement to effect any Disposition).
(v) EXCESS CASH FLOW. Not later than 95 days after the end of each
fiscal year of Borrower commencing with the fiscal year ended December 31,
2000, in an aggregate principal amount equal to 50% of Excess Cash Flow for
such fiscal year; PROVIDED, HOWEVER, that if the unsecured senior long term
debt of Borrower is rated at least Baa3 (or the equivalent) or higher by
Moody's and at least BBB- (or the equivalent) or higher by S&P on the date
such payment would otherwise be required to be made, Borrower shall not be
required to prepay the Loans with Excess Cash Flow as set forth in this
Section 2.10(a)(v) (it being understood that any payment made prior to the
time that such condition is satisfied shall be permanent and not subject to
repayment to Borrower to the extent otherwise made in accordance herewith).
(vi) PURCHASE PRICE ADJUSTMENT. Upon any adjustment to the purchase
price for the SBCL Acquisition exceeding $20.0 million received in cash by
any Company pursuant to the SBCL Acquisition Agreement (other than for any
loss, cost or expense incurred by any Company and net liabilities assumed
by any Company under the SBCL Acquisition Agreement) (the "PURCHASE PRICE
ADJUSTMENT AMOUNT"), in an aggregate principal amount equal to 100% of the
Purchase Price Adjustment Amount.
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(vii) OTHER REQUIRED PREPAYMENTS. If the terms of any agreement,
instrument or indenture pursuant to which any Indebtedness (other than the
Obligations) PARI PASSU with or junior in right of payment to the Loans is
outstanding (or pursuant to which such Indebtedness is guaranteed) require
prepayment of such Indebtedness out of the Net Available Proceeds of any
Disposition unless such Net Available Proceeds are used to prepay other
Indebtedness, then, to the extent not otherwise required by this Section
2.10(a), if the Companies shall not have reinvested the Net Available
Proceeds thereof as permitted by Section 2.10(a)(iv) within the time frame
permitted thereby (but prior to the date required to be applied to such
Indebtedness) the Loans shall be repaid in an amount not less than the
minimum amount that would be required to be prepaid not later than the
latest time as and upon such terms so that such other Indebtedness will not
be required to be prepaid pursuant to the terms of the agreement, indenture
or instrument or guarantee governing such other Indebtedness.
(viii) EXCEPTIONS TO PREPAYMENT. Notwithstanding anything to the
contrary contained in Sections 2.10(a)(i) and 2.10(a)(iv) or in Section
9.06, so long as no Default shall have occurred and be continuing, if on
any date on which a prepayment of Loans would otherwise be required
pursuant to Sections 2.10(a)(i) and 2.10(a)(iv) and the applicable
subsections of Section 9.06 the aggregate amount of Net Available Proceeds
otherwise required by such sections hereof to be applied to prepay Loans on
such date is less than or equal to $5.0 million, Borrower may defer such
prepayment until the date on which the aggregate amount of Net Available
Proceeds otherwise required by such sections hereof be applied to prepay
Loans exceeds $5.0 million. During such deferral period Borrower may apply
all or any part of such aggregate amount to prepay Revolving Loans and may
reborrow such amounts (which amounts, to the extent originally constituting
Net Available Proceeds, shall be deemed to retain their original character
as Net Available Proceeds when so reborrowed) for application as required
by this Section 2.10. Upon the occurrence of a Default, Borrower shall
immediately prepay Loans in the amount of all Net Available Proceeds that
are required to be applied to prepay Loans by this Section 2.10 (without
giving effect to the first and second sentences of this Section
2.10(a)(viii)) and Section 9.06 but which have not previously been so
applied.
(b) APPLICATION. The amount of any required prepayments described in
Section 2.10(a) shall be applied to repay Loans and/or reduce Commitments as
follows:
(i) FIRST, the amount of the required prepayment shall be applied to
the reduction of Amortization Payments on the Term Loans required by
Section 3.01(b) PRO RATA among the Term Facilities based upon the remaining
unpaid amounts thereof; PROVIDED, HOWEVER, that notwithstanding the
foregoing (A) the first $300.0 million of Net Available Proceeds of any
Debt Issuance or Equity Issuance shall be applied first to the outstanding
Capital Markets Facility Loans, (B) the first $200.0 million of any Net
Available Proceeds pursuant to a Permitted Receivables Transaction shall be
applied to the Term A Facility if consummated within six months of the
Closing Date, and (C) the amount required by Section 2.10(a)(iii)(B) and up
to an aggregate since the Closing Date of $25.0 million of any amount
required by Section 2.10(a)(iii)(A) may, at the sole election of Borrower,
be applied solely to the Term C Facility Loans if applied within five
business days of the Closing Date; with any application (I) to the Term A
Facility to be applied PRO RATA to the remaining Amortization Payments
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thereof based on the remaining unpaid amounts thereof and (II) to each of
the other Term Facilities to be applied in inverse order of maturity to the
remaining Amortization Payments thereof. Notwithstanding the foregoing, any
holder of Term B Facility Loans or Term C Facility Loans may, at its sole
discretion, so long as any Term A Facility Loans are then outstanding
(after giving effect to the application of such required prepayment to the
Term A Facility Loans), elect by written notice provided to Administrative
Agent not to have all or any amount of any such required prepayments
applied to such holder's Term B Facility Loans or Term C Facility Loans, as
the case may be, in which case the aggregate amount so declined shall be
applied to the Term A Facility Loans PRO RATA to the remaining Amortization
Payments thereof; PROVIDED, HOWEVER, that (1) to the extent that the
aggregate principal amount of the Term A Facility Loans after giving effect
to such mandatory prepayment is less than the aggregate amount so declined
by the holders of the Term B Facility Loans and Term C Facility Loans, the
excess shall be allocated between the declining holders of the Term B
Facility Loans and Term C Facility Loans PRO RATA based on the aggregate
amount declined by each such holder; and (2) in connection with any
Permitted Receivables Transaction or issuance of Unsecured Notes, the
election to decline permitted by this sentence shall not be available if
such Permitted Receivables Transaction or Debt Issuance occurs within six
months of the Closing Date.
(ii) SECOND, after such time as no Term Loans remain outstanding, the
Revolving Commitments shall be permanently reduced PRO RATA in an amount
equal to the remaining amount of any such required prepayment that would
have been applied to the Term Loans (at the same time that the prepayment
of the Term Loans would have been made and assuming an unlimited amount
thereof then outstanding) and to the extent that, after giving effect to
such reduction, the aggregate principal amount of Revolving Loans, PLUS the
aggregate principal amount of Swing Loans, PLUS the aggregate amount of all
L/C Liabilities would exceed the Revolving Commitments, Borrower shall,
FIRST, prepay outstanding Swing Loans and SECOND, prepay outstanding
Revolving Loans and, THIRD, provide cover for L/C Liabilities as specified
in Section 2.10(d), in an aggregate amount equal to such excess.
(iii) THIRD, after application of prepayments in accordance with
clauses (i) and (ii) above, Borrower shall be permitted to retain any such
remaining excess.
Notwithstanding the foregoing, if the amount of any prepayment of Loans
required under this Section 2.10 shall be in excess of the amount of the ABR
Loans at the time outstanding, only the portion of the amount of such prepayment
as is equal to the amount of such outstanding ABR Loans shall be immediately
prepaid and, at the election of Borrower in its sole discretion, the balance of
such required prepayment shall be either (i) deposited in the Collateral Account
and applied to the prepayment of LIBOR Loans on the last day of the then
next-expiring Interest Period for LIBOR Loans (with all interest accruing
thereon for the account of Borrower) or (ii) prepaid immediately, together with
any amounts owing to the Lenders under Section 5.05. Notwithstanding any such
deposit in the Collateral Account, interest shall continue to accrue on such
Loans until prepayment.
(c) REVOLVING CREDIT EXTENSION REDUCTIONS. Until the R/C Termination
Date, Borrower shall from time to time immediately prepay the Swing Loans and
the Revolving Loans (and/or
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provide cover for L/C Liabilities as specified in Section 2.10(d)) in such
amounts as shall be necessary so that at all times the aggregate outstanding
amount of the Revolving Loans, PLUS the aggregate outstanding amount of Swing
Loans, PLUS the aggregate outstanding L/C Liabilities shall not exceed the
Revolving Commitments as in effect at such time, such amount to be applied,
FIRST, to the Swing Loans, SECOND, to Revolving Loans outstanding and, THIRD, as
cover for L/C Liabilities outstanding as specified in Section 2.10(d).
(d) COVER FOR L/C LIABILITIES. In the event that Borrower shall be
required pursuant to this Section 2.10 to provide cover for L/C Liabilities,
Borrower shall effect the same by paying to Administrative Agent immediately
available funds in an amount equal to the required amount, which funds shall be
retained by Administrative Agent in the Collateral Account (as provided in the
Security Agreement as collateral security in the first instance for the L/C
Liabilities) until such time as all Letters of Credit shall have been terminated
and all of the L/C Liabilities paid in full.
2.11. REPLACEMENT OF LENDERS. Borrower shall have the right, if no
Default then exists, to replace any Lender (including L/C Lender and the Swing
Loan Lender) (the "REPLACED LENDER") with one or more other Eligible Persons
reasonably acceptable to Joint Lead Arrangers (such acceptance not to be
unreasonably withheld or delayed) (collectively, the "REPLACEMENT LENDER") if
(x) such Lender is charging Borrower increased costs or other amounts pursuant
to Section 5.01 or 5.06 in excess of those being charged generally by other
Lenders subject to the same regulatory requirements, or such Lender becomes
incapable of making LIBOR Loans as provided in Section 5.03 when other Lenders
are generally able to do so and/or (y) as provided in Section 12.04(ii), such
Lender refuses to consent to certain proposed amendments, waivers or
modifications with respect to this Agreement; PROVIDED, HOWEVER, that (i) at the
time of any replacement pursuant to this Section 2.11, the Replacement Lender
shall enter into one or more assignment agreements (and with all fees payable
pursuant to Section 12.06 to be paid by the Replacement Lender) in accordance
with Section 12.06 pursuant to which the Replacement Lender shall acquire all of
the Commitments and outstanding Loans of, and in each case L/C Interests held
by, the Replaced Lender and, in connection therewith, shall pay to (x) the
Replaced Lender, an amount equal to the sum of (A) the principal of, and all
accrued interest on, all outstanding Loans of the Replaced Lender, (B) all
Reimbursement Obligations owing to such Replaced Lender, together with all then
unpaid interest with respect thereto at such time, and (C) all accrued, but
theretofore unpaid, fees owing to the Replaced Lender pursuant to Section 2.05,
and (y) L/C Lender an amount equal to such Replaced Lender's R/C Percentage of
any Reimbursement Obligations (which at such time remains a Reimbursement
Obligation) to the extent such amount was not theretofore funded by such
Replaced Lender, and (ii) all obligations of Borrower owing to the Replaced
Lender (other than those specifically described in clause (i) above in respect
of which the assignment purchase price has been, or is concurrently being, paid,
but including any amounts which would be paid to a Lender pursuant to Section
5.05 if Borrower were prepaying a LIBOR Loan) shall be paid in full to such
Replaced Lender concurrently with such replacement. Upon the execution of the
respective assignment agreement, the payment of amounts referred to in clauses
(i) and (ii) above and, if so requested by the Replacement Lender, delivery to
the Replacement Lender of Notes executed by Borrower, the Replacement Lender
shall become a Lender hereunder and the Replaced Lender shall cease to
constitute a Lender hereunder and be released of all its obligations as a
Lender, except with respect to indemnification provisions applicable to the
Replaced Lender under this Agreement, which shall survive as to such Replaced
Lender.
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2.12. DEFAULTING LENDERS. (a) In the event that, at any one time, (i)
any Lender shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a
Defaulted Advance to Borrower, (iii) Borrower shall be required to make any
payment hereunder or under any other Credit Document to or for the account of
such Defaulting Lender and (iv) all of the Revolving Lenders then constituting
Defaulting Lenders owing a Defaulted Advance to Borrower constitute less than
the Majority Revolving Lenders (determined without giving effect to the proviso
in the definition of Majority Revolving Lenders), then Borrower may, so long as
no Default shall occur or be continuing at such time and to the fullest extent
permitted by applicable law, set off and otherwise apply the obligation of
Borrower to make such payment, or any other payment hereunder, to or for the
account of such Defaulting Lender against the obligation of such Defaulting
Lender to make such Defaulted Advance. In the event that, on any date, Borrower
shall so set off and otherwise apply its obligation to make any such payment
against the obligation of such Defaulting Lender to make any such Defaulted
Advance on or prior to such date, the amount so set off and otherwise applied by
Borrower shall constitute for all purposes of this Agreement and the other
Credit Documents a Loan by such Defaulting Lender made on the date of such
setoff under the Commitments pursuant to which such Defaulted Advance was
originally required to have been made pursuant to Section 2.01. Such extension
of credit shall be considered, for all purposes of this Agreement, to comprise
part of the borrowing in connection with which such Defaulted Advance was
originally required to have been made pursuant to Section 2.01, even if the
other advances comprising such borrowing shall be LIBOR Loans on the date such
advance is deemed to be made pursuant to this subsection (a). Borrower shall
notify Administrative Agent at any time Borrower exercises its right of setoff
pursuant to this subsection (a) and shall set forth in such notice (A) the name
of the Defaulting Lender and the Defaulted Advance required to be made by such
Defaulting Lender and (B) the amount set off and otherwise applied in respect of
such Defaulted Advance pursuant to this subsection (a). Any portion of such
payment otherwise required to be made by Borrower to or for the account of such
Defaulting Lender which is paid by Borrower, after giving effect to the amount
set off and otherwise applied by Borrower pursuant to this subsection (a), shall
be applied by Administrative Agent as specified in subsection (b) or (c) of this
Section 2.12.
(b) In the event that, at any one time, (i) any Lender shall be a
Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to
any Agent or any of the other Lenders and (iii) Borrower shall make any payment
hereunder or under any other Credit Document to Administrative Agent for the
account of such Defaulting Lender, then Administrative Agent may, on its behalf
or on behalf of such other Agents or such other Lenders and to the fullest
extent permitted by applicable law, apply at such time the amount so paid by
Borrower to or for the account of such Defaulting Lender to the payment of each
such Defaulted Amount to the extent required to pay such Defaulted Amount. In
the event that Administrative Agent shall so apply any such amount to the
payment of any such Defaulted Amount on any date, the amount so applied by
Administrative Agent shall constitute for all purposes of this Agreement and the
other Credit Documents payment, to such extent, of such Defaulted Amount on such
date. Any such amount so applied by Administrative Agent shall be retained by
Administrative Agent or distributed by Administrative Agent to such other Agents
or such other Lenders, ratably in accordance with the respective portions of
such Defaulted Amounts payable at such time to Administrative Agent, such other
Agents and such other Lenders and, if the amount of such payment made by
Borrower shall at such time be insufficient to pay all Defaulted Amounts owing
at such time to Administrative Agent, such other Agents and such other Lenders,
in the following order of priority:
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(i) FIRST, to the Agents for any Defaulted Amounts then owing to the
Agents, ratably in accordance with such respective Defaulted Amounts then
owing to the Agents;
(ii) SECOND, to L/C Lender and the Swing Loan Lender for any Defaulted
Amounts then owing to them, in their capacities as such, ratably in
accordance with such respective Defaulted Amounts then owing to L/C Lender
and the Swing Loan Lender;
(iii) THIRD, to any other Lenders for any Defaulted Amounts then owing
to such other Lenders, ratably in accordance with such respective Defaulted
Amounts then owing to such other Lenders.
Any portion of such amount paid by Borrower for the account of such Defaulting
Lender remaining, after giving effect to the amount applied by Administrative
Agent pursuant to this subsection (b), shall be applied by Administrative Agent
as specified in subsection (c) of this Section 2.12.
(c) In the event that, at any one time, (i) any Lender shall be a
Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance
or a Defaulted Amount and (iii) Borrower, any Agent or any other Lender shall be
required to pay or distribute any amount hereunder or under any other Credit
Document to or for the account of such Defaulting Lender, then Borrower or such
Agent or such other Lender shall pay such amount to Administrative Agent to be
held by Administrative Agent, to the fullest extent permitted by applicable law,
in escrow or Administrative Agent shall, to the fullest extent permitted by
applicable law, hold in escrow such amount otherwise held by it. Any funds held
by Administrative Agent in escrow under this subsection (c) shall be deposited
by Administrative Agent in an account with Administrative Agent, in the name and
under the control of Administrative Agent, but subject to the provisions of this
subsection (c). The terms applicable to such account, including the rate of
interest payable with respect to the credit balance of such account from time to
time, shall be Administrative Agent's standard terms applicable to escrow
accounts maintained with it. Any interest credited to such account from time to
time shall be held by Administrative Agent in escrow under, and applied by
Administrative Agent from time to time in accordance with the provisions of,
this subsection (c). Administrative Agent shall, to the fullest extent permitted
by applicable law, apply all funds so held in escrow from time to time to the
extent necessary to make any Loans required to be made by such Defaulting Lender
and to pay any amount payable by such Defaulting Lender hereunder and under the
other Credit Documents to Administrative Agent or any other Lender, as and when
such Loans or amounts are required to be made or paid and, if the amount so held
in escrow shall at any time be insufficient to make and pay all such Loans and
amounts required to be made or paid at such time, in the following order of
priority:
(i) FIRST, to the Agents for any amounts then due and payable by such
Defaulting Lender to the Agents hereunder, ratably in accordance with such
amounts then due and payable to the Agents;
(ii) SECOND, to L/C Lender and the Swing Loan Lender for any amounts
then due and payable to them hereunder, in their capacities as such, by
such Defaulting Lender, ratably in accordance with such amounts then due
and payable to L/C Lender and the Swing Loan Lender; and
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(iii) THIRD, to any other Lenders for any amount then due and payable
by such Defaulting Lender to such other Lenders hereunder, ratably in
accordance with such respective amounts then due and payable to such other
Lenders; and
(iv) FOURTH, to Borrower for any Loan then required to be made by such
Defaulting Lender pursuant to a Commitment of such Defaulting Lender.
In the event that any Lender that is a Defaulting Lender shall, at any time,
cease to be a Defaulting Lender, any funds held by Administrative Agent in
escrow at such time with respect to such Lender shall be distributed by
Administrative Agent to such Lender and applied by such Lender to the
Obligations owing to such Lender at such time under this Agreement and the other
Credit Documents ratably in accordance with the respective amounts of such
Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under this
Section 2.12 are in addition to other rights and remedies that Borrower may have
against such Defaulting Lender with respect to any Defaulted Advance and that
any Agent or any Lender may have against such Defaulting Lender with respect to
any Defaulted Amount.
Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01. REPAYMENT OF LOANS.
(a) REVOLVING CREDIT AND SWING LOANS. Borrower hereby promises to pay
to Administrative Agent for the account of each Revolving Lender the entire
outstanding principal amount of such Revolving Lender's Revolving Loans made to
Borrower and each Revolving Loan shall mature, on the R/C Termination Date.
Borrower hereby promises to pay the Swing Loan Lender for its account the entire
outstanding principal amount of each Swing Loan, and such Swing Loan shall
mature, on the earlier of the R/C Termination Date and the first day after such
Swing Loan is made on which a borrowing of Revolving Loans is made.
(b) (1) TERM A FACILITY LOANS, TERM B FACILITY LOANS AND TERM C
FACILITY LOANS. Borrower hereby promises to pay to Administrative Agent for the
account of the Term Lenders in repayment of the principal of the Term Loans
specified in SCHEDULE 3.01(b), the amount of the respective Term Loan specified
in SCHEDULE 3.01(b) under the column entitled "Term A Facility Loans," "Term B
Facility Loans" and "Term C Facility Loans," respectively, on the dates set
forth on SCHEDULE 3.01(b) (subject to adjustment for any prepayments under
Section 2.09 or Section 2.10 to the extent actually made).
(2) CAPITAL MARKETS FACILITY LOANS. Borrower hereby promises to pay to
Administrative Agent for the account of the Capital Markets Facility Lenders, in
repayment of the principal of the Capital Markets Facility Loans, the full
amount of the Capital Markets Facility Loans then outstanding on the date that
is the second anniversary of the Closing Date.
3.02. INTEREST. (a) Borrower hereby promises to pay to Administrative
Agent for the account of each Lender interest on the unpaid principal amount of
each Loan made or maintained by
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such Lender to Borrower for the period from and including the date of such Loan
to but excluding the date such Loan shall be paid in full at the following rates
PER ANNUM:
(i) during such periods as such Loan is an ABR Loan, the Alternate Base
Rate (as in effect from time to time), PLUS the Applicable Margin, and
(ii) during such periods as such Loan is a LIBOR Loan, for each
Interest Period relating thereto, the LIBO Rate for such Loan for such
Interest Period, PLUS the Applicable Margin.
(b) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and other overdue amounts owed by any Obligor
under the Credit Documents (including such interest accruing before and after
judgment) shall bear interest at a rate PER ANNUM equal to (x) in the case of
principal of any Loans, the rate which is 2% in excess of the rate then borne by
such Loans and (y) in the case of interest or such other amounts, the rate which
is 2% in excess of the rate otherwise applicable to ABR Loans which are
Revolving Loans from time to time. Interest which accrues under this paragraph
shall be payable on demand.
(c) Accrued interest on each Loan shall be payable (i) in the case of
an ABR Loan, quarterly on the Quarterly Dates, (ii) in the case of a LIBOR Loan,
on the last day of each Interest Period therefor and, if such Interest Period is
longer than three months, at three-month intervals following the first day of
such Interest Period and (iii) in the case of any LIBOR Loan, upon the payment
or prepayment thereof or the Conversion of such Loan to a Loan of another Type
(but only on the principal amount so paid, prepaid or Converted), except that
interest payable at the rate set forth in Section 3.02(b) shall be payable from
time to time on demand. Promptly after the determination of any interest rate
provided for herein or any change therein, Administrative Agent shall give
notice thereof to the Lenders to which such interest is payable and to Borrower.
Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.01. PAYMENTS. (a) All payments of principal, interest, Reimbursement
Obligations and other amounts to be made by Borrower under this Agreement and
the Notes, and, except to the extent otherwise provided therein, all payments to
be made by the Obligors under any other Credit Document, shall be made in
Dollars, in immediately available funds, without deduction, set-off or
counterclaim other than, in each case, as set forth in Section 2.12, to
Administrative Agent at its account at the Principal Office, not later than
11:00 a.m. New York City time on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day).
(b) Borrower shall, at the time of making each payment under this
Agreement or any Note for the account of any Lender, specify (in accordance with
Section 2.09 and 2.10, if applicable) to Administrative Agent (which shall so
notify the intended recipient(s) thereof) the Class and Type of Loans,
Reimbursement Obligations or other amounts payable by Borrower hereunder to
which such payment is to be applied (and in the event that Borrower fails to so
specify, or if an Event of Default has occurred and is continuing,
Administrative Agent may distribute such payment to the Lenders for
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application to the Obligations under the Credit Documents in such manner as it
or the Majority Lenders, subject to Sections 2.09, 2.10 and 4.02, may determine
to be appropriate).
(c) Except to the extent otherwise provided in the second sentence of
Section 2.03(g), each payment received by Administrative Agent or by L/C Lender
(through Administrative Agent) under this Agreement or any Note for the account
of any Lender shall be paid by Administrative Agent or by L/C Lender (through
Administrative Agent), as the case may be, to such Lender, in immediately
available funds, (x) if the payment was actually received by Administrative
Agent or by L/C Lender (through Administrative Agent), as the case may be, prior
to 11:00 a.m. (New York City time) on any day, on such day and (y) if the
payment was actually received by Administrative Agent or by L/C Lender (through
Administrative Agent), as the case may be, after 11:00 a.m. (New York City time)
on any day, by 1:00 p.m. (New York City time) on the following Business Day (it
being understood that to the extent that any such payment is not made in full by
Administrative Agent or by L/C Lender (through Administrative Agent), as the
case may be, Administrative Agent shall pay to such Lender, upon demand,
interest at the Federal Funds Rate from the date such amount was required to be
paid to such Lender pursuant to the foregoing clauses until the date
Administrative Agent pays such Lender the full amount).
(d) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall accrue for the
period of such extension and be payable at the rate then applicable.
4.02. PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each borrowing of Loans of a particular Class from the Lenders under
Section 2.01 shall be made from the relevant Lenders, each payment of commitment
fees under Section 2.05 in respect of Commitments of a particular Class shall be
made for account of the relevant Lenders, and each termination or reduction of
the amount of the Commitments of a particular Class under Section 2.04 shall be
applied to the respective Commitments of such Class of the relevant Lenders, PRO
RATA according to the amounts of their respective Commitments of such Class,
except that Swing Loans shall be made only by, and interest thereon shall be
paid by Borrower only to, the Swing Loan Lender (subject to such Lender's
obligation in respect of any participation therein purchased by the other
Revolving Lenders as provided in Section 2.01(g)); (b) except as otherwise
provided in Section 5.04, LIBOR Loans of any Class having the same Interest
Period shall be allocated PRO RATA among the relevant Lenders according to the
amounts of their respective Revolving Commitments and Term Loan Commitments (in
the case of the making of Loans) or their respective Revolving Loans and Term
Loans (in the case of Conversions and Continuations of Loans); (c) each payment
or prepayment of principal of Revolving Loans or Term Loans by Borrower shall be
made for the account of the relevant Lenders PRO RATA in accordance with the
respective unpaid outstanding principal amounts of the Loans of such class held
by them; and (d) each payment of interest on Revolving Loans and Term Loans by
Borrower shall be made for account of the relevant Lenders PRO RATA in
accordance with the amounts of interest on such Loans then due and payable to
the respective Lenders.
4.03. COMPUTATIONS. Interest on LIBOR Loans, commitment fees and Letter
of Credit fees shall be computed on the basis of a year of 360 days and actual
days elapsed (including
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the first day but excluding the last day) occurring in the period for which such
amounts are payable and interest on ABR Loans and Reimbursement Obligations
shall be computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such amounts are payable. Notwithstanding the
foregoing, for each day that the Alternate Base Rate is calculated by reference
to the Federal Funds Rate, interest on ABR Loans and Reimbursement Obligations
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day).
4.04. MINIMUM AMOUNTS. Except for mandatory prepayments made pursuant
to Section 2.10 and Conversions or prepayments made pursuant to Section 5.04,
each borrowing, Conversion and prepayment of principal of Loans (other than
Swing Loans, for which the minimum amounts thereof are in Section 2.01(g)) shall
be in an amount at least equal to $1.0 million with respect to ABR Loans and
$1.0 million with respect to LIBOR Loans and in multiples of $100,000 in excess
thereof (borrowings, Conversions or prepayments of or into Loans of different
Types or, in the case of LIBOR Loans, having different Interest Periods at the
same time hereunder to be deemed separate borrowings, Conversions and
prepayments for purposes of the foregoing, one for each Type or Interest
Period). Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of LIBOR Loans having the same Interest Period shall
be in an amount at least equal to $1.0 million and in multiples of $100,000 in
excess thereof and, if any LIBOR Loans or portions thereof would otherwise be in
a lesser principal amount for any period, such Loans or portions, as the case
may be, shall be ABR Loans during such period except where such Loans, or
portions, as the case may be, coincide with any scheduled payment date or
Borrower has indicated to Administrative Agent that Borrower intends or expects
to use such Loans or portions, as the case may be, to make a scheduled payment
hereunder.
4.05. CERTAIN NOTICES. Notices by Borrower to Administrative Agent of
terminations or reductions of the Commitments, of borrowings, Conversions,
Continuations and optional prepayments of Loans and of Classes of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable and
shall be effective only if received by Administrative Agent by telephone not
later than 11:00 a.m. New York City time (promptly followed by written notice
via telecopier) on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing, Conversion, Continuation or prepayment or the
first day of such Interest Period specified in the table below (and not later
than 11:00 a.m. New York City time on the Business Day of the borrowing or
prepayment in the case of Swing Loans).
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NOTICE PERIODS
<TABLE>
Notice Number of Business Days Prior
- ------ -----------------------------
<S> <C>
Termination or reduction of Commitments 2
Borrowing or optional prepayment of, or
Conversions into, ABR Loans (other than Swing
Loans) 1
Borrowing or optional prepayment of,
Conversions into, Continuations as, or duration
of Interest Periods for, LIBOR Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount
and the Class of the Commitments to be terminated or reduced. Each such notice
of borrowing, Conversion, Continuation or prepayment shall specify the Class of
Loans to be borrowed, Converted, Continued or prepaid and the amount (subject to
Section 4.04) and Type of each Loan to be borrowed, Converted, Continued or
prepaid and the date of borrowing, Conversion, Continuation or prepayment (which
shall be a Business Day). Each such notice of the duration of an Interest Period
shall specify the Loans to which such Interest Period is to relate. Unless
otherwise consented to by Agents in their sole discretion, prior to the earlier
of (x) five Business Days after the Closing Date, and (y) the date on which
Borrower has been notified by Joint Lead Arrangers that the primary syndication
of the Commitments has been completed, no borrowing of or Conversion into any
LIBOR Loan may be made, and, in addition to the foregoing limitation, prior to
the earlier of (x) ten days after the Closing Date and (y) the date on which
Borrower has been notified by Joint Lead Arrangers that the primary syndication
of the Commitments has been completed, no Interest Period of more than one month
may be elected. Administrative Agent shall promptly notify the Lenders of the
contents of each such notice. In the event that Borrower fails to select the
Type of Loan, or the duration of any Interest Period for any LIBOR Loan, within
the time period and otherwise as provided in this Section 4.05, such Loan (if
outstanding as a LIBOR Loan) will be automatically Converted into an ABR Loan on
the last day of the then current Interest Period for such Loan or (if
outstanding as an ABR Loan) will remain as, or (if not then outstanding) will be
made as, an ABR Loan (and Administrative Agent will endeavor (but shall not be
obligated) to notify Borrower of the same).
4.06. NON-RECEIPT OF FUNDS BY ADMINISTRATIVE AGENT. Unless
Administrative Agent shall have received written notice from a Lender or
Borrower (the "PAYOR") prior to the date on which the Payor is to make payment
to Administrative Agent of (in the case of a Lender) the proceeds of a Loan to
be made by such Lender hereunder or a payment to Administrative Agent for the
account of one or more of the Lenders hereunder (such payment being herein
called the "REQUIRED PAYMENT"), which notice shall be effective upon receipt,
that the Payor does not intend to make the Required Payment to Administrative
Agent, Administrative Agent may assume that the Required Payment has been made
and may, in reliance upon such assumption (but shall not be required to), make
the amount thereof available to the intended recipient(s) on such date; and, if
the Payor has not in fact made the Required Payment to Administrative Agent, the
recipient(s) of such payment shall, on demand, repay to Administrative Agent the
amount so made available together with interest thereon in respect of
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each day during the period commencing on the date (the "ADVANCE DATE") such
amount was so made available by Administrative Agent until the date
Administrative Agent recovers such amount at a rate PER ANNUM equal to the
Federal Funds Rate for such day and, if such recipient(s) shall fail promptly to
make such payment, Administrative Agent shall be entitled to recover such
amount, on demand, from the Payor, together with interest as aforesaid;
PROVIDED, HOWEVER, that if neither the recipient(s) nor the Payor shall return
the Required Payment to Administrative Agent within three Business Days of the
date such demand was made, then, retroactively to the Advance Date, the Payor
and the recipient(s) shall each be obligated to pay interest on the Required
Payment as follows (without double recovery):
(i) if the Required Payment shall represent a payment to be made by
Borrower to the Lenders, Borrower and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the rate set forth in Section 3.02(b) (without
duplication of the obligation of Borrower under Section 3.02 to pay
interest on the Required Payment at the rate set forth in Section 3.02(b)),
it being understood that the return by the recipient(s) of the Required
Payment to Administrative Agent shall not limit such obligation of Borrower
under Section 3.02 to pay interest at the rate set forth in Section 3.02(b)
in respect of the Required Payment and
(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Lenders to Borrower, the Payor, or Borrower, shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment pursuant to Section 3.02, it being understood that the
return by Borrower, of the Required Payment to Administrative Agent shall
not limit any claim Borrower may have against the Payor in respect of such
Required Payment.
4.07. RIGHT OF SETOFF; SHARING OF PAYMENTS; ETC. (a) If any Event of
Default shall have occurred and be continuing and Administrative Agent shall
have, pursuant to Section 10, declared the Loans or Notes due and payable
pursuant to the provisions of Section 10, each Obligor agrees that, in addition
to (and without limitation of) any right of setoff, banker's lien or
counterclaim a Lender may otherwise have, each Lender shall be entitled, at its
option (to the fullest extent permitted by law), to set off and apply any
deposit (general or special, time or demand, provisional or final), or other
indebtedness, held by it for the credit or account of such Obligor at any of its
offices, in Dollars or in any other currency, against any principal of or
interest on any of such Lender's Loans, Reimbursement Obligations or any other
amount payable to such Lender hereunder that is not paid when due (regardless of
whether such deposit or other indebtedness is then due to such Obligor), in
which case it shall promptly notify such Obligor and Administrative Agent
thereof; PROVIDED, HOWEVER, that such Lender's failure to give such notice shall
not affect the validity thereof.
(b) Each of the Lenders agrees that, if it should receive (other than
pursuant to Section 5) any amount hereunder (whether by voluntary payment, by
realization upon security, by the exercise of the right of setoff or banker's
lien, by counterclaim or cross action, by the enforcement of any right under the
Credit Documents, or otherwise) which is applicable to the payment of the
principal of, or interest on, the Loans, Reimbursement Obligations or fees, the
sum of which with respect to the related sum or sums received by other Lenders
is in a greater proportion than the total of such
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amounts then owed and due to such Lender bears to the total of such amounts then
owed and due to all of the Lenders immediately prior to such receipt, then such
Lender receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the respective
Obligor to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount; PROVIDED, HOWEVER, that if
all or any portion of such excess amount is thereafter recovered from such
Lender, such purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest. Borrower consents to the
foregoing arrangements.
(c) Borrower agrees that any Lender so purchasing such a participation
may exercise all rights of setoff, banker's lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender were a direct
holder of Loans or other amounts (as the case may be) owing to such Lender in
the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other Indebtedness or
obligation of any Obligor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. YIELD PROTECTION, ETC.
5.01. ADDITIONAL COSTS. (a) If the adoption of, or any change in, in
each case after the date hereof, any Requirement of Law or in the interpretation
or application thereof or compliance by any Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority or the NAIC made subsequent to the date hereof:
(i) shall subject any Lender or L/C Lender to any additional tax of any
kind whatsoever with respect to this Agreement, any Note, any Letter of
Credit or any Lender's participation therein, any L/C Document or any Loan
made by such Lender or change the basis of taxation of payments to such
Lender in respect thereof by any Governmental Authority (except for taxes
covered by or expressly excluded from coverage by Section 5.06, changes in
the rate of tax on the overall net income or net profits of such Lender or
its Applicable Lending Office, or any affiliate thereof or franchise taxes
or similar taxes imposed with respect to or in lieu of its net income or
net profits by any Governmental Authority);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender or L/C Lender which is not otherwise included in the
determination of the LIBO Rate hereunder; or
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(iii) shall impose on such Lender or L/C Lender any other condition
(excluding taxes);
and the result of any of the foregoing is to increase the cost to such Lender or
L/C Lender, by an amount which such Lender or L/C Lender deems to be material
(and it is the policy of such Lender or L/C Lender to seek reimbursement from a
borrower for such amount), of making, converting into, continuing or maintaining
LIBOR Loans or issuing or participating in Letters of Credit or to reduce any
amount receivable hereunder in respect thereof then, in any such case, Borrower
shall, within 10 days of written demand therefor, pay such Lender or L/C Lender
any additional amounts necessary to compensate such Lender or L/C Lender on a
net after-tax basis (taking into account any additional tax costs or tax
benefits) for such increased cost or reduced amount receivable; PROVIDED,
HOWEVER, that a Lender claiming additional amounts under this Section 5.01(a)
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Applicable Lending Office
if the making of such a designation would avoid the need for, or in the
reasonable opinion of such Lender or L/C Lender materially reduce the amount of,
such increased cost that may thereafter accrue and would not, in the sole
judgment of such Lender, be otherwise disadvantageous to such Lender. Without
limiting the survival of any other covenant hereunder, this Section 5.01 shall
survive the termination of this Agreement and the payment of the Notes and all
other Obligations payable hereunder.
(b) In the event that any Lender or L/C Lender shall have determined
that the adoption after the date hereof of any law, rule, regulation or
guideline regarding capital adequacy (or any change after the date hereof
therein or in the interpretation or application thereof) or compliance by any
Lender or L/C Lender or any corporation controlling such Lender or L/C Lender
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any central bank or other Governmental Authority or the
NAIC, in each case, made subsequent to the date hereof including, without
limitation, the issuance after the date hereof of any final rule, regulation or
guideline, does or shall have the effect of reducing the rate of return on such
Lender's or L/C Lender's or such corporation's capital as a consequence of its
obligations hereunder or under any Letter of Credit to a level below that which
such Lender or L/C Lender or such corporation could have achieved but for such
adoption, change or compliance (taking into consideration such Lender's or L/C
Lender's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Lender or L/C Lender to be material (and it is the policy
of such Lender or L/C Lender to seek reimbursement from a borrower for such
amount), then from time to time, after submission by such Lender or L/C Lender
to Borrower (with a copy to Administrative Agent) of a written request therefor,
Borrower shall, within 10 days of such written request, pay to such Lender or
L/C Lender such additional amount or amounts as will compensate such Lender or
L/C Lender on a net after-tax basis (taking into account any additional tax
costs or tax benefits) for such reduction.
5.02. INABILITY TO DETERMINE INTEREST RATE. If prior to the first day
of any Interest Period: (a) Administrative Agent shall have determined (which
determination shall be conclusive and binding upon Borrower) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the LIBOR Base Rate for such Interest Period, or (b)
Administrative Agent shall have received notice from the Majority Lenders that
the LIBOR Base Rate determined or to be determined for such Interest Period will
not adequately and fairly reflect the cost
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to such Lenders (or any affiliate of any such Lender from which such Lender
customarily obtains funds) (as conclusively certified by such Lenders) of making
or maintaining their affected Loans during such Interest Period, Administrative
Agent shall give telecopy or telephonic notice thereof to Borrower and the
Lenders as soon as practicable thereafter. If such notice is given, (x) any
LIBOR Loans requested to be made on the first day of such Interest Period shall
be made as ABR Loans, (y) any Loans that were to have been Converted on the
first day of such Interest Period to LIBOR Loans shall be Converted to or
Continued as ABR Loans and (z) any outstanding LIBOR Loans shall be Converted,
on the first day of such Interest Period, to ABR Loans; PROVIDED, HOWEVER, that
in any event any such LIBOR Loan Converted into an ABR Loan shall bear interest
at the Prime Rate then in effect. Until such notice has been withdrawn by
Administrative Agent, no further LIBOR Loans shall be made or Continued as such,
nor shall Borrower have the right to Convert Loans to LIBOR Loans.
5.03. ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that any change after the date hereof in any Requirement
of Law or in the interpretation or application thereof shall make it unlawful
for any Lender or L/C Lender or its Applicable Lending Office to honor its
obligation to make or maintain LIBOR Loans or issue Letters of Credit hereunder
(and, in the sole opinion of such Lender or L/C Lender, the designation of a
different Applicable Lending Office would either not avoid such unlawfulness or
would be disadvantageous to such Lender or L/C Lender), then such Lender or L/C
Lender shall promptly notify Borrower thereof (with a copy to Administrative
Agent) and such Lender's or L/C Lender's obligation to make or Continue, or to
Convert Loans of any other Type into, LIBOR Loans or issue Letters of Credit
shall be suspended until such time as such Lender or L/C Lender may again make
and maintain LIBOR Loans or issue Letters of Credit (in which case the
provisions of Section 5.04 shall be applicable); PROVIDED, HOWEVER, that each
such Lender agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to designate a different
Applicable Lending Office if the making of such a designation would avoid such
unlawfulness or would not, in the sole judgment of such Lender, be otherwise
disadvantageous to such Lender.
5.04. TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to
make LIBOR Loans or to Continue, or to Convert ABR Loans into, LIBOR Loans shall
be suspended pursuant to Section 5.03, such Lender's LIBOR Loans shall be
automatically Converted into ABR Loans on the last day(s) of the then current
Interest Period(s) for such LIBOR Loans (or on such earlier date as such Lender
may specify to Borrower with a copy to Administrative Agent as is required by
law) and, unless and until such Lender gives notice as provided below that the
circumstances specified in Section 5.03 which gave rise to such Conversion no
longer exist:
(i) to the extent that such Lender's LIBOR Loans have been so
Converted, all payments and prepayments of principal which would otherwise
be applied to such Lender's LIBOR Loans shall be applied instead to its ABR
Loans; and
(ii) all Loans which would otherwise be made or Continued by such
Lender as LIBOR Loans shall be made or Continued instead as ABR Loans and
all ABR Loans of such Lender which would otherwise be Converted into LIBOR
Loans shall remain as ABR Loans.
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If such Lender gives notice to Borrower with a copy to Administrative Agent that
the circumstances specified in Section 5.03 which gave rise to the Conversion of
such Lender's LIBOR Loans pursuant to this Section 5.04 no longer exist (which
such Lender agrees to do promptly upon such circumstances ceasing to exist) at a
time when LIBOR Loans are outstanding, such Lender's ABR Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding LIBOR Loans, to the extent necessary so that,
after giving effect thereto, all Loans held by the Lenders holding LIBOR Loans
and by such Lender are held PRO RATA (as to principal amounts, Types and
Interest Periods) in accordance with their respective Commitments.
5.05. COMPENSATION. (a) Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any reasonable loss or reasonable expense which
such Lender may sustain or incur as a consequence of (1) default by Borrower in
payment when due of the principal amount of or interest on any LIBOR Loan, (2)
default by Borrower in making a borrowing of, Conversion into or Continuation of
LIBOR Loans after Borrower has given a notice requesting the same in accordance
with the provisions of this Agreement, (3) default by Borrower in making any
prepayment after Borrower has given a notice thereof in accordance with the
provisions of this Agreement, or (4) the Conversion or the making of a payment
or a prepayment of LIBOR Loans on a day which is not the last day of an Interest
Period with respect thereto, including in each case, any such loss (excluding
loss of Applicable Margin) or expense arising from the reemployment of funds
obtained by it or from fees payable to terminate the deposits from which such
funds were obtained.
(b) Any Lender requesting compensation pursuant to this Section 5.05
will furnish to Administrative Agent and Borrower a certificate setting forth
the basis and amount of such request and such certificate, absent manifest
error, shall be conclusive. Without limiting the survival of any other covenant
hereunder, this covenant shall survive the termination of this Agreement and the
payment of the Notes and all other amounts payable hereunder.
5.06. NET PAYMENTS. (a) Except as provided in Section 5.06(b), all
payments made by any Obligor hereunder or under any Note or Guarantee shall be
made free and clear of, and without deduction or withholding for, any present or
future Taxes now or hereafter imposed by any Governmental Authority or by any
political subdivision or taxing authority thereof or therein with respect to
such payments (but excluding any Excluded Tax) and all interest, penalties or
similar liabilities with respect thereto (all such Taxes (other than Excluded
Taxes) being referred to collectively as "COVERED TAXES"). If any Covered Taxes
are so levied or imposed, each Obligor agrees on a joint and several basis to
pay the full amount of such Covered Taxes, and such additional amounts as may be
necessary so that every payment to any Lender or Administrative Agent, as the
case may be, of all amounts due under this Agreement, the Guarantees or under
any Note, after withholding or deduction for or on account of any Covered Taxes,
will not be less than the amount such Lender or Administrative Agent would have
received had no such withholding or deduction been made. If any amounts are
payable in respect of Covered Taxes pursuant to the preceding sentence, each
Obligor agrees, notwithstanding the definition of Excluded Taxes, to reimburse
on a joint and several basis each Lender, upon the written request of such
Lender, (i) for Taxes imposed on or measured by the net income or net profits of
such Lender pursuant to the laws of the jurisdiction in which such Lender is
organized or in which the principal office or Applicable Lending Office of such
Lender is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction by reason of the making of payments
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in respect of Covered Taxes pursuant to this Section (including pursuant to this
sentence) and (ii) for any withholding of Taxes as such Lender shall determine
are payable by, or withheld from, such Lender in respect of amounts paid in
respect of Covered Taxes to or on behalf of such Lender pursuant to the
preceding sentence and in respect of any amounts paid to or on behalf of such
Lender pursuant to this sentence. Each Obligor will furnish to Administrative
Agent within 45 days after the date the payment of any Covered Taxes is due
pursuant to applicable law certified copies of tax receipts or other
documentation reasonably satisfactory to such Lender evidencing such payment by
such Obligor. Except as provided in Section 5.06(b) and (e), the Obligors agree
to jointly and severally indemnify and hold harmless each Lender, and reimburse
such Lender upon its written request, for the amount of any Covered Taxes so
levied or imposed and paid by such Lender.
"EXCLUDED TAXES" shall mean other than as provided in the third
sentence of the first paragraph of this Section 5.06(a), any Tax (other than any
Other Taxes) (i) imposed on or measured by the net income or net profits of
Administrative Agent or any Lender or (ii) imposed on Administrative Agent or
any Lender in the nature of franchise taxes or similar taxes imposed with
respect to or in lieu of net income or net profits, in each case as a result of
a present or former connection between Administrative Agent or such Lender and
the jurisdiction, the laws pursuant to which such Tax is imposed or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from Administrative Agent or such Lender having
executed, delivered or performed its obligations or received a payment under, or
enforced, the Loan Documents).
(b) Each Lender that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) (a "NON-U.S. LENDER") agrees to
deliver to Borrower and Administrative Agent on or prior to the Effective Date
or, in the case of a Lender that is an assignee or transferee of an interest
under this Agreement pursuant to Section 12.06 (unless the assignee or
transferee Lender was already a Lender hereunder immediately prior to such
assignment or transfer and was in compliance with this Section 5.06(b) as of the
date of such assignment or transfer), on the date of such assignment or transfer
to such Lender, (i) two accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001 (or successor forms) certifying to such
Lender's entitlement to a complete exemption from United States withholding tax
with respect to payments to be made under this Agreement or under any Note or
any Guarantee (or, with respect to any assignee Lender, at least as extensive as
the assigning Lender), or (ii) if the Lender is not a "bank" within the meaning
of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of EXHIBIT J (any such certificate, a "FOREIGN LENDER
CERTIFICATE") and (y) two accurate and complete original signed copies of
Internal Revenue Service Form W-8 (or successor form) certifying to such
Lender's entitlement to a complete exemption from United States withholding tax
with respect to payments to be made under this Agreement or under any Note or
any Guarantee (or, with respect to any assignee Lender, at least as extensive as
the assigning Lender). In addition, each Lender agrees that from time to time
after the Closing Date, when a lapse in time or change in circumstances renders
the previous certification obsolete or inaccurate in any material respect, it
will deliver to Borrower and Administrative Agent two new accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001, or Form
W-8 and a Foreign Lender Certificate, as the case may be, and such other forms
as may be required in order to confirm or establish the entitlement of such
Lender to a continued exemption from United States withholding tax with respect
to payments under this Agreement or
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any Note or any Guarantee, or it shall immediately notify Borrower or each
Guarantor, as the case may be, and Administrative Agent of its inability to
deliver any such Form or Certificate, in which case such Lender shall not be
required to deliver any such form or certificate pursuant to this Section
5.06(b) for so long as such payments may be made free from United States
withholding tax. Notwithstanding the foregoing, no Lender shall be required to
deliver any such form or certificate described in this Section 5.06(b) if a
change in treaty, law or regulation has occurred prior to the date on which such
delivery would otherwise be required that renders any such form or certificate
inapplicable or would prevent the Lender from duly completing and delivering any
such form or certificate with respect to it and such Lender so advises Borrower.
No Obligor shall be required to indemnify any Non-U.S. Lender, or to pay any
additional amounts to any Non-U.S. Lender, in respect of any Covered Taxes to
the extent that the obligation to pay such Covered Taxes would not have arisen
but for a failure by such Non-U.S. Lender to comply with the provisions of this
Section 5.06(b). Notwithstanding anything to the contrary contained in this
Section 5.06 and except as set forth in Section 12.06(b), Borrower agrees to pay
additional amounts and to indemnify each Lender in the manner set forth in
Section 5.06(a) (without regard to the identity of the jurisdiction requiring
the deduction or withholding) in respect of any amounts deducted or withheld by
it as described in the immediately preceding sentence as a result of any changes
after the Effective Date or, in the case of a Lender that is an assignee or
transferee of an interest under this Agreement pursuant to Section 12.06 (unless
the assignee or transferee lender was already a Lender hereunder immediately
prior to such assignment or transfer and was in compliance with this Section
5.06(b) as of the date of such assignment or transfer), on the date of such
assignment or transfer to such Lender, in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or withholding of Covered Taxes.
(c) In addition, Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Notes or from
the execution, delivery, filing, recordation or registration of, or otherwise
with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER
TAXES"); PROVIDED, HOWEVER, that Borrower shall have no obligation to pay Other
Taxes that arise as a result of a participation pursuant to Section 12.06.
(d) Any Lender claiming any additional amounts payable pursuant to this
Section 5.06 agrees to use (at the Obligors' expense) reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
change the jurisdiction of its Applicable Lending Office if the making of such
change would avoid the need for, or in the reasonable opinion of such Lender
materially reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the sole judgment of such Lender, be otherwise
disadvantageous to such Lender.
(e) No Obligor shall be required to indemnify any Lender or to pay any
additional amounts to any Lender pursuant to Section 5.06(a) to the extent that
(i) the obligation to withhold existed on the date a Lender designated a
different lending office; PROVIDED, HOWEVER, that this clause (i) shall not
apply (1) to a different lending office resulting from a designation made at the
request of any Obligor, and (2) to the extent that the indemnity payment or
additional amounts any Lender would be entitled to receive (without regard to
this clause (i)) do not exceed the indemnity payment or additional amounts that
the Person making the designation of such different lending office would have
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been entitled to receive in the absence of such designation or (ii) the
obligation to pay such additional amounts would not have arisen but for a
failure by such Lender to comply with the provisions of Section 5.06(b) or (d)
above.
(f) If any Obligor pays any additional amounts under this Section 5.06
to a Lender and such Lender determines in its sole and absolute discretion that
it has actually received or realized in connection therewith any refund or any
reduction of, or credit against, its tax liabilities (a "TAX BENEFIT"), such
Lender shall pay to such Obligor, an amount that the Lender shall, in its sole
and absolute discretion, determine is equal to the net benefit, after tax, which
was obtained by the Lender as a consequence of such Tax Benefit; PROVIDED,
HOWEVER, that (i) such Lender shall not be required to make any payment under
this Section 5.06(f) if an Event of Default shall have occurred and be
continuing; (ii) any taxes that are imposed on a Lender as a result of a
disallowance or reduction (including through the expiration of any tax credit
carryover or carryback of such Lender that otherwise would not have expired) of
any Tax Benefit with respect to which such Lender has made a payment to Obligor
pursuant to this Section 5.06(f) shall be treated as a tax for which Obligor is
obligated to indemnify such Lender pursuant to this Section 5.06 without any
exclusions or defenses; and (iii) nothing in this Section 5.06(f) shall require
the Lender to disclose any confidential information to any Company (including
its tax returns).
5.07. LIMITATIONS ON OBLIGATIONS OF BORROWER. Each Lender or L/C Lender
shall notify Borrower of any event that will entitle such Lender or L/C Lender
to compensation under Section 5.01 or Section 5.06 as promptly as practicable,
but in any event within 90 days after such Lender or L/C Lender obtains actual
knowledge thereof; PROVIDED, HOWEVER, that if any Lender or L/C Lender fails to
give such notice within 90 days after it obtains actual knowledge of such an
event, such Lender or L/C Lender shall, with respect to compensation payable
pursuant to Section 5.01 or Section 5.06 in respect of any costs resulting from
such event, only be entitled to payment under Section 5.01 or Section 5.06 for
costs incurred from and after the date 90 days prior to the date that such
Lender or L/C Lender does give such notice. Each Lender or L/C Lender will
furnish to Borrower at the time of request for compensation under paragraph (a)
or (b) of Section 5.01 or Section 5.06 a certificate setting forth the basis,
amount and reasonable detail of computation of each request by such Lender or
L/C Lender for compensation under Section 5.01 or Section 5.06, which
certificate shall, except for demonstrable error, be final, conclusive and
binding for all purposes.
Section 6. GUARANTEE.
6.01. THE GUARANTEE. The Guarantors hereby jointly and severally
guarantee as a primary obligor and not as a surety to each Creditor and their
respective successors and assigns the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of the principal of and
interest (including any interest, fees, costs or charges that would accrue but
for the provisions of the Bankruptcy Code after any bankruptcy or insolvency
petition under the Bankruptcy Code) on the Loans made by the Lenders to, and the
Notes held by each Lender of, Borrower, and all other Obligations from time to
time owing to each Creditor by any Obligor under any Credit Document or Swap
Contract relating to the Loans, in each case strictly in accordance with the
terms thereof (such obligations being herein collectively called the "GUARANTEED
OBLIGATIONS"). The Guarantors hereby jointly and severally agree that if
Borrower or other Guarantor(s) shall fail to pay in full when
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due (whether at stated maturity, by acceleration or otherwise) any of the
Guaranteed Obligations, the Guarantors will promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
6.02. OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantors
under Section 6.01 shall constitute a guaranty of payment and are absolute,
irrevocable and unconditional, joint and several, irrespective of the value,
genuineness, validity, regularity or enforceability of any Guaranteed Obligation
of any Obligor under any Credit Document or any other agreement or instrument
referred to herein or therein, or any substitution, release or exchange of any
other guarantee of or security for any of the Guaranteed Obligations, and, to
the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or Guarantor (except for payment in full).
Without limiting the generality of the foregoing, it is agreed that the
occurrence of any one or more of the following shall not alter or impair the
liability of the Guarantors hereunder which shall remain absolute, irrevocable
and unconditional under any and all circumstances as described above:
(i) at any time or from time to time, without notice to the Guarantors,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be amended in any
respect, or any right under the Credit Documents or any other agreement or
instrument referred to herein or therein shall be amended or waived in any
respect or any other guarantee of any of the Guaranteed Obligations or any
security therefor shall be released or exchanged in whole or in part or
otherwise dealt with;
(iv) any lien or security interest granted to, or in favor of, L/C
Lender or any Lender or Agent as security for any of the Guaranteed
Obligations shall fail to be perfected; or
(v) the release of any other Guarantor.
The Guarantors hereby expressly waive diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that any
Creditor exhaust any right, power or remedy or proceed against Borrower under
this Agreement or the Notes or any other agreement or instrument referred to
herein or therein, or against any other Person under any other guarantee of, or
security for, any of the Guaranteed Obligations. The Guarantors waive any and
all notice of the creation, renewal, extension, waiver, termination or accrual
of any of the Guaranteed Obligations and notice of or proof of reliance by any
Creditor upon this guarantee or acceptance of this guarantee, and
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the Guaranteed Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this guarantee, and
all dealings between Borrower and the Creditors shall likewise be conclusively
presumed to have been had or consummated in reliance upon this guarantee. This
guarantee shall be construed as a continuing, absolute, irrevocable and
unconditional guarantee of payment without regard to any right of offset with
respect to the Guaranteed Obligations at any time or from time to time held by
the Creditors, and the obligations and liabilities of the Guarantors hereunder
shall not be conditioned or contingent upon the pursuit by the Creditors or any
other Person at any time of any right or remedy against Borrower or against any
other Person which may be or become liable in respect of all or any part of the
Guaranteed Obligations or against any collateral security or guarantee therefor
or right of offset with respect thereto. This guarantee shall remain in full
force and effect and be binding in accordance with and to the extent of its
terms upon the Guarantors and the successors and assigns thereof, and shall
inure to the benefit of the Lenders, and their respective successors and
assigns, notwithstanding that from time to time during the term of this
Agreement there may be no Guaranteed Obligations outstanding.
6.03. REINSTATEMENT. The obligations of the Guarantors under this
Section 6 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of Borrower or other Obligor in respect of
the Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise. The Guarantors jointly
and severally agree that they will indemnify the Creditors on demand for all
reasonable costs and expenses (including reasonable fees of counsel) incurred by
the Creditors in connection with such rescission or restoration, including any
such costs and expenses incurred in defending against any claim alleging that
such payment constituted a preference, fraudulent transfer or similar payment
under any bankruptcy, insolvency or similar law, other than any costs or
expenses resulting from the gross negligence or bad faith of such Creditor.
6.04. SUBROGATION; SUBORDINATION. Each Guarantor hereby agrees that
until the indefeasible payment and satisfaction in full in cash of all
Guaranteed Obligations and the expiration and termination of the Commitments of
the Lenders under this Agreement it shall not exercise any right or remedy
arising by reason of any performance by it of its guarantee in Section 6.01,
whether by subrogation or otherwise, against Borrower or any other Guarantor of
any of the Guaranteed Obligations or any security for any of the Guaranteed
Obligations. The payment of any amounts due with respect to any indebtedness of
Borrower or any other Guarantor now or hereafter owing to any Guarantor or
Borrower by reason of any payment by such Guarantor under the Guarantee in this
Section 6 is hereby subordinated to the prior indefeasible payment in full in
cash of the Guaranteed Obligations. Each Guarantor agrees that it will not
demand, sue for or otherwise attempt to collect any such indebtedness of
Borrower to such Guarantor until the Obligations shall have been indefeasibly
paid in full in cash. If, notwithstanding the foregoing sentence, any Guarantor
shall prior to the indefeasible payment in full in cash of the Guaranteed
Obligations collect, enforce or receive any amounts in respect of such
indebtedness, such amounts shall be collected, enforced and received by such
Guarantor as trustee for the Creditors and be paid over to Administrative Agent
on account of the Guaranteed Obligations without affecting in any manner the
liability of such Guarantor under the other provisions of the guaranty contained
herein.
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6.05. REMEDIES. The Guarantors jointly and severally agree that, as
between the Guarantors and the Creditors, the obligations of Borrower under this
Agreement and the Notes may be declared to be forthwith due and payable as
provided in Section 10 (and shall be deemed to have become automatically due and
payable in the circumstances provided in said Section 10) for purposes of
Section 6.01, notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically due
and payable) as against Borrower and that, in the event of such declaration (or
such obligations being deemed to have become automatically due and payable),
such obligations (whether or not due and payable by Borrower) shall forthwith
become due and payable by the Guarantors for purposes of Section 6.01.
6.06. INSTRUMENT FOR THE PAYMENT OF MONEY. Each Guarantor hereby
acknowledges that the guarantee in this Section 6 constitutes an instrument for
the payment of money, and consents and agrees that any Creditor, at its sole
option, in the event of a dispute by such Guarantor in the payment of any moneys
due hereunder, shall have the right to bring a motion-action under New York CPLR
Section 3213.
6.07. CONTINUING GUARANTEE. The guarantee in this Section 6 is a
continuing guarantee of payment, and shall apply to all Guaranteed Obligations
whenever arising.
6.08. GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action or
proceeding involving any state corporate law, or any state, Federal or foreign
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Guarantor under Section 6.01
would otherwise be held or determined to be void, voidable, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under Section 6.01, then, notwithstanding any
other provision to the contrary, the amount of such liability shall, without any
further action by such Guarantor, any Creditor or any other Person, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
Section 7. CONDITIONS PRECEDENT.
7.01. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement
is subject to the satisfaction of the conditions precedent that (the date of the
satisfaction (or waiver) of each of the following conditions, the "EFFECTIVE
DATE"):
(i) DOCUMENTATION AND EVIDENCE OF CERTAIN MATTERS. Joint Lead Arrangers
shall have received the following documents, each duly executed where
appropriate (with sufficient conformed copies for each Lender), each of
which shall be reasonably satisfactory to Joint Lead Arrangers in form and
substance:
(1) CORPORATE DOCUMENTS. Certified true and complete copies of
the charter and by-laws and all amendments thereto (or equivalent
documents) of each Obligor and of all documents evidencing corporate
authority for each Obligor (including board of director resolutions and
evidence of the incumbency, including specimen signatures, of officers)
with respect to the execution, delivery and performance
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of such of the Credit Documents to which such Obligor is intended to be
a party and each other document to be delivered by such Obligor from
time to time in connection herewith and the extensions of credit
hereunder and the consummation of the Transactions, certified as of the
Effective Date as complete and correct copies thereof by the Secretary
or an Assistant Secretary of such Obligor.
(2) THE CREDIT AGREEMENT. This Agreement, (i) executed and
delivered by a duly authorized officer of each Obligor, and (ii)
executed and delivered by a duly authorized officer of each Lender and
Agent.
(3) SBCL ACQUISITION AGREEMENT. Executed copies of the SBCL
Acquisition Agreement and all exhibits, appendices, annexes and
schedules to any thereof, each certified by a senior officer of
Borrower as true, complete and correct copies thereof.
(ii) YEAR 2000. Joint Lead Arrangers shall have received a satisfactory
Officers' Certificate from an officer of Borrower reasonably acceptable to
Joint Lead Arrangers confirming that (a) the Companies are taking all
commercially reasonable steps to ascertain the extent of, and to quantify
and successfully address, business and financial risks facing the Companies
as a result of what is commonly referred to as the "Year 2000 problem"; and
(b) the Companies' critical computer applications will, on a timely basis,
adequately address the Year 2000 problem in all material respects so as not
to result in a Material Adverse Effect.
(iii) PAYMENT OF FEES AND EXPENSES. All accrued and unpaid fees and
expenses of the Lenders and Joint Lead Arrangers in connection with the
Credit Documents, to the extent invoiced prior to the Effective Date, shall
have been paid.
7.02. CONDITIONS TO INITIAL EXTENSION OF CREDIT. The obligation of the
Lenders to make any initial extension of credit hereunder (whether by making a
Loan or issuing a Letter of Credit) is subject to the satisfaction of the
conditions precedent that the Effective Date shall have occurred (or shall occur
simultaneously therewith) and to the satisfaction of the additional conditions
precedent that (the date of the satisfaction (or waiver) of all of the
conditions to the initial extension of credit in this Section 7.02, the "CLOSING
DATE"):
(i) DOCUMENTATION AND EVIDENCE OF CERTAIN MATTERS. Joint Lead Arrangers
shall have received the following documents, each duly executed where
appropriate (with sufficient conformed copies for each Lender), each of
which shall be reasonably satisfactory to Joint Lead Arrangers in form and
substance:
(1) OFFICERS' CERTIFICATE. An Officers' Certificate of Borrower,
dated the Closing Date, (x) to the effect set forth in clauses (a) and
(b) of Section 7.03(i).
(2) OPINIONS OF COUNSEL. Opinion of (I) Ray Marier, Vice
President and General Counsel of Borrower, substantially in the form of
EXHIBIT E-1; (II) Shearman & Sterling, counsel to the Obligors,
substantially in the form of EXHIBIT E-2; and
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(III) local counsel opinions reasonably acceptable to Joint Lead
Arrangers with respect to Mortgages delivered on the Closing Date.
(3) NOTES. The Notes, duly completed and executed for each Lender
that has requested Notes prior to the Closing Date.
(4) SECURITY DOCUMENTS. The Security Agreement, such other pledge
agreements required under local law in the reasonable judgment of
counsel to Administrative Agent and requested reasonably in advance of
the intended Closing Date (each of which shall be in full force and
effect) and the Perfection Certificate, substantially in the form of
EXHIBIT M, duly authorized, executed and delivered by the Obligors
(including SBCL and its Subsidiaries) and Administrative Agent, and the
certificates identified under the name of such Obligors in Schedule I-A
and Schedule I-B to the Security Agreement, accompanied by undated
stock powers, instruments of assignment or issuer acknowledgments
executed in blank if applicable, and the intercompany indebtedness
identified under the name of such Obligors in Schedule II to the
Security Agreement, accompanied by undated notations or instruments of
assignment executed in blank if applicable.
(5) SOLVENCY CERTIFICATE. A certificate in the form of EXHIBIT
C-2 from the chief financial officer of Borrower in form and substance
reasonably satisfactory to Joint Lead Arrangers with respect to the
Solvency (on a consolidated basis) of each Obligor immediately after
the consummation of the Transactions to occur on the Closing Date.
(6) INSURANCE. Evidence of insurance complying with the
requirements of Section 9.04 and the Security Documents and
certificates complying with Section 9.04.
(ii) REPAYMENT OF EXISTING CREDIT FACILITIES. Borrower shall have
effected the Existing Credit Facilities Repayment on terms and conditions
and pursuant to documentation reasonably satisfactory to Joint Lead
Arrangers. All Liens in respect of the Existing Credit Facilities shall
have been released and Joint Lead Arrangers shall have received evidence
thereof reasonably satisfactory to Joint Lead Arrangers and a "pay-off"
letter or letters reasonably satisfactory to Joint Lead Arrangers with
respect to the Existing Credit Facilities Repayment; in addition, from any
Person holding any Lien securing any such Indebtedness, such Uniform
Commercial Code termination statements, mortgage releases and other
instruments, in each case in proper form for recording, as Joint Lead
Arrangers shall have reasonably requested to release and terminate the
Liens of record securing such Indebtedness (or arrangements for such
release and termination reasonably satisfactory to Joint Lead Arrangers
shall have been made).
(iii) NO OTHER DEBT OR PREFERRED STOCK. After giving effect to the
Transactions and the other transactions contemplated hereby, Borrower and
its Subsidiaries shall have outstanding no Funded Indebtedness or preferred
stock (or direct or indirect guarantee or other
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credit support in respect thereof) outstanding other than the Loans, the
Unsecured Notes (if issued), the Existing Notes, the Voting Cumulative
Preferred Stock outstanding on the Effective Date, and other Indebtedness
(including Capital Leases) in an amount not exceeding $65.0 million in the
aggregate.
(iv) SBCL ACQUISITION AGREEMENT IN FULL FORCE AND EFFECT; FILINGS. The
SBCL Acquisition Agreement shall be in full force and effect. Joint Lead
Arrangers shall have received copies, certified by Borrower, of all filings
made with any Governmental Authority in connection with the Transactions.
(v) CONSUMMATION OF TRANSACTIONS. Each of the Transactions (other than
the Existing Credit Facilities Repayment and the extensions of credit
hereunder) shall have been (or shall be contemporaneously) consummated in
all material respects in accordance with the terms hereof and the terms of
documentation therefor (without the material waiver or material amendment
of any material condition therein unless consented to by Joint Lead
Arrangers and the Lenders) that are in form and substance reasonably
satisfactory to Joint Lead Arrangers (with any material condition therein
requiring the satisfaction or consent of any Person other than Joint Lead
Arrangers or the Lenders being deemed to require the reasonable
satisfaction or consent of Joint Lead Arrangers and the Lenders). Each of
the parties thereto shall have complied in all material respects with
Section 7.11 of the SBCL Acquisition Agreement and all other covenants set
forth in the SBCL Acquisition Agreement (without the waiver of performance
under or amendment of Section 7.11 of the SBCL Acquisition Agreement or the
material waiver or material amendment of any of the other material terms
thereof unless consented to by Joint Lead Arrangers and the Lenders).
(vi) MAXIMUM SBCL ACQUISITION PRICE. The consideration paid in
connection with the SBCL Acquisition shall consist of 12,564,336 newly
issued shares of common stock of Borrower as set forth in the SBCL
Acquisition Agreement and no more than $1,025.0 million in cash (subject to
adjustment post-closing as set forth in the SBCL Acquisition Agreement).
(vii) NOTE TENDER ACCEPTANCE; NOTE DEFEASANCE. If the consummation of
the Transactions would result in a breach or default of any of the terms
and conditions of the Existing Notes or the Existing Indenture, Borrower
shall have (or shall contemporaneously with the initial extension of credit
hereunder) (a) at a date prior to the Closing Date reasonably acceptable to
Joint Lead Arrangers and Borrower, commenced the Note Tender pursuant to
documentation and on terms and conditions reasonably satisfactory to Joint
Lead Arrangers for all of the Existing Notes and, if an amount thereof
reasonably acceptable to Joint Lead Arrangers and Borrower is tendered (but
in any event not less than an amount thereof sufficient to eliminate all
material negative covenants and events of default relating thereto in the
Existing Indenture), consummate such Note Tender on or prior to the Closing
Date; or (b) to the extent that a Note Tender which eliminates all material
covenants and events of default relating thereto shall not have been
consummated, on or prior to the Closing Date, defease all such covenants
and events of default (except to the extent prohibited by the terms of the
Existing Indenture) pursuant to documentation reasonably satisfactory to
Joint Lead Arrangers. If the Note Tender is accomplished, the Supplemental
Indenture shall have become effective in
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accordance with the terms thereof and the terms of such Supplemental
Indenture shall be satisfactory to Joint Lead Arrangers.
(viii) NO MATERIAL ADVERSE CHANGE. There shall not have occurred or
become known any material adverse change, or any condition or event that
could reasonably be expected to result in a material adverse change, in the
business, operations, financial condition or assets of Borrower, SBCL and
their respective Subsidiaries taken as a whole (and after giving effect to
the Transactions) since December 31, 1998.
(ix) PRO FORMA BALANCE SHEET. The Lenders shall have received a pro
forma consolidated balance sheet of Borrower dated as of the date of the
most recently available quarterly financial statements after giving effect
to the Transactions, which balance sheet shall be consistent in all
material respects with the sources and uses of funds previously provided to
the Lenders.
(x) APPROVALS. All requisite material Governmental Authorities and
material third parties have approved or consented to the Transactions and
the other transactions contemplated hereby to the extent required (without
the imposition of any materially burdensome or materially adverse
conditions or requirements in the reasonable judgment of Joint Lead
Arrangers), all such approvals are in full force and effect, all applicable
appeal periods have expired and there shall be no Proceeding, actual or
threatened, that has or could have a reasonable likelihood of restraining,
preventing or imposing materially burdensome conditions on any of the
Transactions or the other transactions contemplated hereby. Joint Lead
Arrangers shall have received copies (certified by Borrower as true and
correct) of any such approvals or consents so obtained. Joint Lead
Arrangers shall have received satisfactory evidence that all necessary
Hart-Scott-Rodino waiting periods shall have expired on terms and
conditions reasonably acceptable to Joint Lead Arrangers (other than any
waiting periods relating to item 3 of SCHEDULE 1.01(h)).
(xi) PAYMENT OF FEES AND EXPENSES. All accrued and unpaid fees and
expenses (including the fees and expenses of Cahill Gordon & Reindel and of
local counsel to Joint Lead Arrangers) of the Lenders and Joint Lead
Arrangers in connection with the Credit Documents, to the extent invoiced
prior to the Closing Date, shall have been paid.
(xii) DOCUMENTATION FOR DEBT SECURITIES ISSUANCE. If any Unsecured
Notes are issued on or prior to the Closing Date, all terms and provisions
thereof and all documentation therefor shall be in form and substance
reasonably satisfactory to the Majority Lenders (it being understood that
if the Unsecured Notes and the documentation therefor are substantially
consistent with the terms set forth in the description thereof distributed
to the Lenders on June 16, 1999 such terms and provisions and documentation
are reasonably satisfactory to the Majority Lenders for the purposes of
this Section 7.02(xii) and Section 9.08(j) with respect to the aggregate
principal amount issued on the Closing Date).
(xiii) MINIMUM EBITDA. Joint Lead Arrangers shall have received
reasonably satisfactory evidence (including reasonably satisfactory
supporting schedules and other data) that
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combined EBITDA (calculated in a manner reasonably consistent with the
calculations set forth in the Confidential Information Memorandum, which
calculations were reviewed by Joint Lead Arrangers but shall exclude any
expenses retained by Seller pursuant to the SBCL Acquisition Agreement
associated with pensions, other post-retirement liabilities and other
employee liabilities) of Borrower, SBCL and their respective Subsidiaries
after giving effect to the Transactions for each of the twelve months ended
December 31, 1998 and the trailing twelve months ended May 31, 1999 would
not be less than $305.0 million and such EBITDA shall not be materially
inconsistent with the projections provided to Joint Lead Arrangers prior to
the date of the Commitment Letter.
(xiv) NO LEGAL BAR. No Law shall be applicable in the reasonable
judgment of Joint Lead Arrangers that restrains, prevents or imposes
material adverse conditions upon any material component of the Transactions
or the financing thereof, including the Credit Facilities (other than any
law of general applicability to financing transactions of the type
contemplated by the Commitment Letter in effect on the date of the
Commitment Letter (as in effect on such date) of which Joint Lead Arrangers
in the exercise of reasonable diligence should have been aware).
(xv) FILINGS AND LIEN SEARCHES. The Obligors shall have authorized,
executed and delivered each of the following:
(1) UCC Financing Statements (Form UCC-1) in appropriate form for
filing under the UCC and any other applicable law, rule or regulation
in each jurisdiction as may be necessary or appropriate to perfect the
Liens created, or purported to be created, by the Security Documents;
(2) certified copies of Requests for Information (Form UCC-11),
tax lien, judgment lien searches or equivalent reports or lien search
reports, each of a recent date listing all effective financing
statements, lien notices or comparable documents that name any Obligor
as debtor and that are filed in those state, county and other
jurisdictions in which any of the Collateral of such Obligor is
located, the state, county and other jurisdictions in which each such
Person's principal place of business is located and the state in which
such Person is organized, none of which encumber the Collateral covered
or intended to be covered by the Security Agreement other than those
encumbrances which constitute Prior Liens and other Liens expressly
permitted by the terms of the applicable Security Document; and
(3) evidence of arrangements for (A) the completion of all
recordings and filings of, or with respect to, the Security Documents,
including, to the extent required by Joint Lead Arrangers, filings with
the United States Patent and Trademark Office and the United States
Copyright Office and (B) the taking of all actions as may be necessary
or, in the reasonable opinion of Agents, desirable, to perfect the
Liens created, or purported to be created, by the Security Documents.
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(xvi) JOINDER AGREEMENT TO BE SIGNED BY SBCL AND SUBSIDIARIES.
SBCL and its Subsidiaries shall become parties to this Agreement as
Guarantors through the execution and delivery of a Joinder Agreement.
(xvii) FINANCIAL STATEMENTS. The Lenders shall have received (i)
audited consolidated financial statements of Borrower for fiscal year
1998 and of SBCL for fiscal years 1996 through 1998 and (ii) unaudited
interim consolidated financial statements of Borrower and of SBCL for
each fiscal quarterly period ended subsequent to December 31, 1998 (and
each monthly period ended subsequent to December 31, 1998 for which a
quarterly statement has not been delivered if reasonably requested by
Joint Lead Arrangers (which monthly financial statements need only be
in a format consistent with the internal financials customarily
produced by Borrower)) as to which such financial statements are
available all of which shall be consistent in all material respects
with information previously provided to the Lenders.
(xviii) MORTGAGE MATTERS. On or prior to the Closing Date, each
Obligor shall have caused to be delivered to Administrative Agent, on
behalf of the Lenders:
(1) a Mortgage encumbering each Mortgaged Real Property in
favor of Administrative Agent, for the benefit of the Lenders,
duly executed and acknowledged by the Obligor that is the owner
of or holder of an interest in such Mortgaged Real Property, and
otherwise in form for recording in the recording office of each
political subdivision where each such Mortgaged Real Property is
situated, together with such certificates, affidavits,
questionnaires or returns as shall be required in connection with
the recording or filing thereof to create a lien under applicable
law, and such UCC-1 Financing Statements and other similar
statements as are required in respect of such Mortgage, all of
which shall be in form and substance reasonably satisfactory to
Administrative Agent, and any other instruments necessary to
grant a mortgage lien under the laws of any applicable
jurisdiction, which Mortgage and financing statements and other
instruments shall when recorded be effective to create a first
priority Lien on such Mortgaged Real Property subordinate to no
Liens other than Prior Liens applicable to such Mortgaged Real
Property and subject to no other Liens except Liens expressly
permitted by such Mortgage; and
(2) those documents, instruments, certificates and other
matters referred to in SCHEDULE 7.02(xviii).
7.03. CONDITIONS TO INITIAL AND SUBSEQUENT EXTENSIONS OF CREDIT. The
obligation of the Lenders to make any Loan or otherwise extend any credit to
Borrower upon the occasion of each borrowing or other extension of credit
(whether by making a Loan or issuing a Letter of Credit) hereunder (including
the initial borrowing) is subject to the further conditions precedent that:
(i) NO DEFAULT OR EVENT OF DEFAULT; REPRESENTATIONS AND WARRANTIES
TRUE. Both immediately prior to the making of such Loan or other extension
of credit and also after giving pro forma effect thereto and to the
intended use thereof:
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(a) no Default or Event of Default shall have occurred and be
continuing;
(b) the representations and warranties made by the Obligors in
Section 8, and by each Obligor in each of the other Credit Documents to
which it is a party shall be accurate in all material respects on and
as of the date of the making of such Loan or other extension of credit
with the same force and effect as if made on and as of such date
(except that (1) any representation or warranty which is expressly made
as of a specific date need only be accurate on the date of the making
of such Loan or other extension of credit as of such specific date and
(2) subject to the foregoing clause (1) of this parenthetical, any such
representation or warranty qualified as to materiality shall be
accurate on and as of the date of the making of such Loan or other
extension of credit with the same force and effect as if made on and as
of such date); and
(c) the sum of the aggregate amount of the outstanding Swing
Loans, PLUS Revolving Loans, PLUS L/C Liabilities shall not exceed the
Revolving Commitments then in effect.
(ii) NO LEGAL BAR. The Loans and other extensions of credit and the use
of proceeds thereof shall not contravene, violate or conflict with any
Requirement of Law.
(iii) NOTICE OF BORROWING. Other than with respect to a Swing Loan,
Administrative Agent shall have received a Notice of Borrowing duly
completed and complying with Section 4.05.
Each Notice of Borrowing or request for the issuance of a Letter of
Credit delivered by Borrower hereunder shall constitute a certification by
Borrower to the effect set forth in clauses (i)-(ii) above as of the date of
such borrowing or issuance. Each notice submitted by Borrower hereunder for an
extension of credit hereunder shall constitute a representation and warranty by
Borrower, as of the date of such notice and as of the relevant borrowing date or
date of issuance of a Letter of Credit, as applicable, that the applicable
conditions in Sections 7.02 and 7.03 have been satisfied or waived in accordance
with the terms hereof.
7.04. DETERMINATIONS UNDER SECTION 7. For purposes of determining
compliance with the conditions specified in Sections 7.01 and 7.02, each Lender
shall be deemed to have consented to, approved or accepted or to be satisfied
with each document or other matter required thereunder to be consented to or
approved by or acceptable or satisfactory to the Lenders unless an officer of
Administrative Agent responsible for the transactions contemplated by this
Agreement shall have received notice from such Lender prior to the date that
Borrower, by notice to the Lenders, designates as the proposed date of the
extension of credit, specifying its objection thereto.
Section 8. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to the Creditors that (A) at and as of the Effective Date (with respect
to Sections 8.01, 8.04, 8.05 and 8.06 and solely with respect to this Agreement)
and (B) at and as of each Funding Date (with respect to Section 8.01 through and
including 8.25) (in each case with respect to each Funding Date immediately
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before and immediately after giving effect to the transactions to occur on such
date (including, with respect to the Closing Date, the Transactions)):
8.01. CORPORATE EXISTENCE. Each Company: (a) is a corporation,
partnership, limited liability company or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power and authority, and
has all governmental licenses, authorizations, consents and approvals necessary
to own its Property and carry on its business as now being conducted; (c) is
qualified to do business and is in good standing in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary;
and (d) is in compliance with all Requirements of Law, EXCEPT, in the case of
clauses (a), (b), (c) and (d) where the failure thereof individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
8.02. FINANCIAL CONDITION; ETC. (A) Borrower has delivered to the
Lenders (i) the audited consolidated balance sheets of Borrower and the
Subsidiaries as of December 31, 1998, 1997 and 1996, and the related statements
of earnings, changes in stockholders' equity and cash flows for the fiscal years
ended on those dates, together with reports thereon by PricewaterhouseCoopers
LLP, certified public accountants and (ii) unaudited consolidated balance sheet
of Borrower and the Subsidiaries as of March 31, 1998 and March 31, 1999 and the
related statements of earnings as of such date, and a consolidated statement of
cash flows for the period from the beginning of the respective fiscal year to
the end of such period. All of said financial statements, including in each case
the related schedules and notes, are true, complete and correct and have been
prepared in accordance with GAAP consistently applied and present fairly in all
material respects the financial position of Borrower and its Subsidiaries as of
the respective dates of said balance sheets and the results of their operations
for the respective periods covered thereby, subject (in the case of interim
statements) to normal period-end audit adjustments.
(B) Borrower has delivered to Lenders (i) the audited consolidated
balance sheets of SBCL as of December 31, 1998, 1997 and 1996, and the related
statements of earnings, changes in stockholders' equity and cash flows for the
fiscal years ended on those dates, together with the reports thereon by
PricewaterhouseCoopers LLP, certified public accountants and (ii) unaudited
consolidated balance sheets of SBCL as of March 31, 1999 and the related
statements of earnings, changes in stockholders' equity and cash flows for the
fiscal quarters ended on such dates. All of said financial statements, including
in each case the related schedules and notes, are true and complete and have
been prepared in accordance with GAAP consistently applied and present fairly in
all material respects the financial position of SBCL as of the respective dates
of said balance sheets and the results of their operations for the respective
periods covered thereby, subject (in the case of interim statements) to normal
period-end audit adjustments (such financial statements, collectively, the "SBCL
FINANCIAL STATEMENTS").
(C) Except as set forth in SCHEDULE 8.02(C), in the financial
statements or other information referred to in Section 8.02(A) or Section
8.02(B), as of the Effective Date, there are no material liabilities of any
Company of any kind required to be set forth on a balance sheet or in the notes
thereto prepared in accordance with GAAP, whether accrued, contingent, absolute,
determined,
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determinable or otherwise, and there is no existing condition, situation or set
of circumstances which is reasonably likely to result in such a liability.
(D) Since December 31, 1998 there has been no Material Adverse Change.
(E) The pro forma balance sheet of Consolidated Companies (the "PRO
FORMA BALANCE SHEET"), certified by the chief financial officer of Borrower,
copies of which will be furnished to each Lender not later than the second
Business Day (nor earlier than the fifth Business Day) prior to the Closing
Date, is the balance sheet of Consolidated Companies as of the date of the
latest available quarterly balance sheet of Borrower prior to the Closing Date
(the "PRO FORMA DATE"), adjusted to give effect (as if such events had occurred
on such date) to the Transactions to occur on the Closing Date and the
application of the proceeds of all Indebtedness to be incurred on such date. The
Pro Forma Balance Sheet, together with the notes thereto, accurately reflects in
all material respects all adjustments necessary to give effect to the
Transactions, was prepared based on good faith assumptions, and presents fairly
in all material respects on a pro forma basis the consolidated financial
position of Consolidated Companies as at the Pro Forma Date, adjusted as
described above.
8.03. LITIGATION. Except as set forth in SCHEDULE 8.03 or as described
in Borrower's Form 10-K for the fiscal year ended December 31, 1998, there is no
Proceeding (other than any QUI TAM Proceeding, to which this Section is limited
to the best of Borrower's knowledge) pending against, or, to the knowledge of
Borrower, threatened in writing against or affecting, any Company or any of its
respective Properties before any Governmental Authority that, if determined or
resolved adversely to such Company, could reasonably be expected to have a
Material Adverse Effect.
8.04. NO BREACH; NO DEFAULT. (A) None of the execution, delivery and
performance by any Obligor of any Credit Document or Transaction Document to
which it is a party nor the consummation of the transactions herein and therein
contemplated (including the Transactions) will (i) conflict with or result in a
breach of, or require any consent (which has not been obtained and is in full
force and effect) under, any Organic Document of any Company or any applicable
Requirement of Law or any order, writ, injunction or decree of any Governmental
Authority binding on any Company, or any term or provision of any Contractual
Obligation of any Company or (ii) constitute (with due notice or lapse of time
or both) a default under any such Contractual Obligation, or (iii) result in the
creation or imposition of any Lien (except for the Liens created pursuant to the
Security Documents) upon any Property of any Company pursuant to the terms of
any such Contractual Obligation, except with respect to each of the foregoing
which could not reasonably be expected to have a Material Adverse Effect and
which would not subject any Creditor to any material risk of damages or
liability to third parties.
(B) No Default or Event of Default has occurred and is continuing.
8.05. ACTION. Each Company has all necessary corporate or other entity
power, authority and legal right to execute, deliver and perform its obligations
under each Credit Document and Transaction Document to which it is a party and
to consummate the transactions herein and therein contemplated; the execution,
delivery and performance by each Company of each Credit Document and Transaction
Document to which it is a party and the consummation of the transactions
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herein and therein contemplated have been duly authorized by all necessary
corporate or other entity action on its part; and this Agreement has been duly
and validly executed and delivered by each Obligor and constitutes, and each of
the Notes and the other Credit Documents to which it is a party when executed
and delivered by such Obligor (in the case of the Notes, for value) will
constitute, its legal, valid and binding obligation, enforceable against each
Obligor in accordance with its terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws of general applicability from time to time in effect
affecting the enforcement of creditors' rights and remedies and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
8.06. APPROVALS. No authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority or any securities
exchange are necessary for the execution, delivery or performance by any Company
of the Credit Documents and the Transaction Documents to which it is a party or
for the legality, validity or enforceability hereof or thereof or for the
consummation of the transactions herein and therein contemplated, except for
filings and recordings in respect of the Liens created pursuant to the Security
Documents and except for consents, authorizations and filings that have been
obtained or made and are in full force and effect or the failure of which to
obtain would not have a Material Adverse Effect (it being understood that this
Section 8.06 does not apply to ordinary course filings necessary to be made
after the Closing Date in connection with the Property (including licenses)
acquired pursuant to the SBCL Acquisition). All applicable Hart-Scott-Rodino
waiting periods have expired with respect to the SBCL Acquisition (other than
waiting periods post-Closing relating to the Investments contemplated by
SCHEDULE 1.01(h)).
8.07. [RESERVED].
8.08. ERISA. No ERISA Event has occurred or is reasonably expected to
occur which could have a Material Adverse Effect. The present value of all
accumulated benefit obligations of all underfunded Pension Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed by more than $20.0 million the fair market value of the
assets of all such underfunded Pension Plans. Each ERISA Entity is in compliance
in all material respects with the presently applicable provisions of ERISA and
the Code with respect to each Employee Benefit Plan. Using actuarial assumptions
and computation methods consistent with subpart 1 of subtitle E of Title IV of
ERISA, the aggregate liabilities of any of each ERISA Entity to all
Multiemployer Plans in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each such Multiemployer Plan, would not
result in a Material Adverse Effect. All Foreign Plans are in substantial
compliance with all Requirements of Law (other than to the extent such failure
to comply would not reasonably be expected to have a Material Adverse Effect).
8.09. TAXES. Except as would not have a Material Adverse Effect, (i)
all tax returns, statements, reports and forms (including estimated Tax or
information returns) (collectively, the "TAX Returns") required to be filed with
any taxing authority by, or with respect to, each Company have been timely filed
in accordance with all applicable laws; (ii) each Company has timely paid or
made adequate provision for payment of all Taxes shown as due and payable on Tax
Returns that have been so filed, and, as of the time of filing, each Tax Return
was accurate and complete and correctly
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reflected the facts regarding income, business, assets, operations, activities
and the status of each Company (other than Taxes which are being contested in
good faith and for which adequate reserves are reflected on the financial
statements delivered hereunder); and (iii) each Company has made adequate
provision for all Taxes payable by such Company for which no Tax Return has yet
been filed.
Except as set forth on SCHEDULE 8.09, (i) as of the date hereof no
Company is a member of an affiliated group of corporations within the meaning of
Section 1504 of the Code other than an affiliated group of corporations of which
Borrower is the common parent; and (ii) there are no material tax sharing or tax
indemnification agreements under which any Company is required to indemnify
another party (other than another Company) for a material amount of Taxes.
8.10. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT; OTHER
RESTRICTIONS. No Company is an "investment company", or a company "controlled"
by an "investment company", within the meaning of the United States Investment
Company Act of 1940, as amended. No Company is a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the United States Public Utility Holding Company
Act of 1935, as amended. No Obligor is subject to regulation under any law or
regulation which limits its ability to incur Indebtedness, other than Regulation
X of the Board of Governors of the Federal Reserve System.
8.11. ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE 8.11 and
except as would not, individually or in the aggregate, result in a Material
Adverse Effect: (i) each Company is in compliance with and has no liability
under any applicable Environmental Laws and there are no Environmental Laws,
including such Laws which have been formally proposed for public comment, which
could result in expenditures by any Company; (ii) no Company, or to the
knowledge of the Obligors, any of its predecessors in interest, has disposed of,
arranged for the disposal or treatment of, or otherwise released Hazardous
Materials at any site at which any Person is conducting or, to the knowledge of
the Obligors, plans to conduct any action under Environmental Law; (iii) no Real
Property now or formerly owned, leased or operated by any Company, or, to the
knowledge of the Obligors, any of their respective predecessors in interest, is
(x) listed or proposed for listing on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or (y) listed on the Comprehensive Environmental Response,
Compensation and Liability Information System List promulgated pursuant to
CERCLA or (z) included on any similar lists maintained by any Governmental
Authority; (iv) there are no past or present events, conditions, activities,
practices or actions, or any agreements, judgments, decrees or orders by which
any Company is bound, which would reasonably be expected to prevent any
Company's compliance with any Environmental Law, or which would reasonably be
expected to give rise to any liability of any Company under any Environmental
Law; (v) no Lien has been recorded, or to the knowledge of the Obligors,
threatened, under any Environmental Law with respect to any Property of any
Company; and (vi) no Company is subject to any Proceeding alleging the violation
of, or liability under, any Environmental Law or has received any Environmental
Claims and, to the knowledge of the Obligors, no such Proceeding or
Environmental Claim is threatened.
8.12. [RESERVED].
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8.13. USE OF PROCEEDS. Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying Margin
Stock and no part of the proceeds of any extension of credit hereunder will be
used directly or indirectly and whether immediately, incidentally or ultimately
to purchase or carry any Margin Stock or to extend credit to others for such
purpose or to refund Indebtedness originally incurred for such purpose.
Following application of the proceeds of each extension of credit hereunder, not
more than 25 percent of the value of the assets (either of Borrower individually
or of Consolidated Companies) will be Margin Stock. If requested by any
Creditor, Borrower will furnish to Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
U-1 referred to in Regulation U. Borrower will use the proceeds of (i) all Term
Loans to finance the Transactions and pay related fees and expenses and (ii)
Revolving Loans to finance the Transactions (in an amount not to exceed on the
Closing Date $75.0 million unless consented to by Joint Lead Arrangers in their
sole discretion), pay fees and expenses related thereto, and for general
corporate purposes.
8.14. SUBSIDIARIES, ETC. As of the Effective Date, Borrower has no
Subsidiaries or interests (whether direct or indirect) in partnerships, Minority
Interests or business trusts other than the entities set forth on SCHEDULE 8.14
and other than any Investment in any entity with a book value of less than $1.0
million, of which there are no more than $5.0 million of Investments as of the
Effective Date. Each Subsidiary listed on SCHEDULE 8.14 (other than each
Excluded Entity) will be a Guarantor as of the Closing Date. Borrower owns, as
of the Effective Date, not less than the percentage of the issued and
outstanding Equity Interests or other evidences of the ownership of each of its
Subsidiaries, partnerships or Minority Interests listed on SCHEDULE 8.14 as set
forth on such Schedule. No such Subsidiary has issued any securities convertible
into its Equity Interests (or other evidence of ownership) or any Equity Rights
to acquire such Equity Interests (other than buy/sell agreements relating to
Equity Interests of any Subsidiary that is not a Wholly Owned Subsidiary), and
the outstanding Equity Interests of such Subsidiaries are owned by the entities
listed in SCHEDULE 8.14 free and clear of all Liens and Equity Rights of others
of any kind whatsoever, except for Liens pursuant to the Security Documents.
8.15. OWNERSHIP OF PROPERTY; LIENS. Each Company has good record and
marketable title in fee simple to, or a valid leasehold interest in, all its
material Real Property, and good title to, or a valid leasehold interest in, all
its other material Property, and none of such Property interest is subject to
any Lien, except for Liens permitted by Section 9.07.
8.16. SECURITY INTEREST; ABSENCE OF FINANCING STATEMENTS; ETC. The
Security Documents, once executed and delivered, will (except as noted in the
Security Agreement) create, in favor of Administrative Agent for the benefit of
the Creditors, as security for the obligations purported to be secured thereby,
a valid and enforceable, and upon filing or recording with the appropriate
Governmental Authorities and delivery of the applicable documents to
Administrative Agent, perfected security interest in and Lien upon all of the
Collateral (and the proceeds thereof), superior to and prior to the rights of
all third persons other than the holders of Prior Liens and subject to no other
Liens except as expressly permitted by this Agreement and the Security
Documents.
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Except as set forth on SCHEDULE 8.16 and for Liens under the Existing
Credit Facilities which will be released at the Closing Date and except for (i)
in the case of Collateral, Liens expressly permitted by the Security Documents;
(ii) in the case of all other Property, Permitted Liens and (iii) the Liens
created by the Security Documents, there is no currently effective financing
statement, security agreement, chattel mortgage, real estate mortgage or other
document filed or recorded with any filing records, registry, or other public
office, that purports to cover, affect or give notice of any Lien on, or
security interest in, any Property of any Company or rights thereunder.
8.17. LICENSES AND PERMITS; COMPLIANCE WITH LAWS. The Companies hold
all governmental permits, licenses, authorizations, consents and approvals
necessary for the Companies to own, lease, and operate their respective
Properties and to operate their respective businesses as now being conducted
(collectively, the "PERMITS"), except for Permits the failure of which to obtain
would not have a Material Adverse Effect. None of the Permits has been modified
in any way that is reasonably likely to have a Material Adverse Effect. All
Permits are in full force and effect except where the failure to be in full
force and effect would not have a Material Adverse Effect.
8.18. TRUE AND COMPLETE DISCLOSURE; EXCHANGE ACT FILINGS. The
information, reports, financial statements, exhibits and schedules furnished in
writing by Borrower to any Creditor in connection with the negotiation,
preparation or delivery of the Credit Documents or included or delivered
pursuant thereto or pursuant to the Confidential Information Memorandum dated
March 1999 distributed in connection with the syndication of the Commitments and
Loans, including Borrower's Annual Report on Form 10-K for the year ended
December 31, 1998 and all filings made with the Commission under the Exchange
Act by any Company subsequent thereto, but in each case excluding all
projections, whether prior to or after the date of this Agreement, when taken as
a whole, do not, as of the date such information was furnished, contain any
untrue statement of material fact or omit to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not materially misleading. The projections and pro
forma financial information furnished at any time by any Obligor to any Creditor
pursuant to this Agreement have been prepared in good faith based on assumptions
believed by Borrower to be reasonable at the time made, it being recognized by
the Lenders that such financial information as it relates to future events is
not to be viewed as fact and that actual results during the period or periods
covered by such financial information may differ from the projected results set
forth therein by a material amount and no Obligor, however, makes any
representation as to the ability of any Company to achieve the results set forth
in any such projections. Each Obligor understands that all such statements,
representations and warranties shall be deemed to have been relied upon by the
Lenders as a material inducement to make each extension of credit hereunder.
8.19. SOLVENCY. As of each Funding Date immediately prior to and
immediately following the consummation of the Transactions and the extensions of
credit to occur on such date each Obligor on a consolidated basis with each of
its Subsidiaries is and will be Solvent (after giving effect to Section 6.08).
8.20. CONTRACTS. No Company is in default under any material contract
or agreement to which it is a party or by which it is bound, nor, to Borrower's
knowledge, does any condition exist
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that, with notice or lapse of time or both, would constitute such default,
excluding in any case such defaults that are not reasonably likely to have a
Material Adverse Effect.
8.21. LABOR MATTERS. Except as set forth in SCHEDULE 8.21, there is (i)
no unfair labor practice complaint pending against any Company or, to the best
knowledge of Borrower, threatened against any Company, before the National Labor
Relations Board or any other Governmental Authority, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against any Company or, to the best knowledge of
Borrower after due inquiry, threatened against any Company, (ii) no strike,
labor dispute, slowdown or stoppage pending against any Company or, to the best
knowledge of Borrower, after due inquiry, threatened against any Company and
(iii) to the best knowledge of Borrower after due inquiry, no union
representation question existing with respect to the employees of any Company
and, to the best knowledge of Borrower, no union organizing activities are
taking place, except such as would not, with respect to any matter specified in
clause (i), (ii) or (iii) above, individually or in the aggregate, have a
Material Adverse Effect.
8.22. SUBORDINATED DEBT. The Loans and all interest and fees thereon
are senior debt with respect to all Subordinated Debt of each Obligor and
entitled to the full benefits of all subordination provisions therein and such
subordination provisions are in full force and effect.
8.23. YEAR 2000. The Companies are taking all commercially reasonable
steps to ascertain the extent of, and to quantify and successfully address
business and financial risks associated with, the "Year 2000" issue. No Company
has reason to believe that the risks associated with the Year 2000 issue would
have a Material Adverse Effect.
8.24. INTELLECTUAL PROPERTY. To the best knowledge of Borrower after
due inquiry, each Company owns or has the right to use all of the patents,
patent applications, trademarks, trademark applications, service marks, service
mark applications, copyrights, trade secrets and know-how that are used in the
operation of its business as presently conducted (collectively, "INTELLECTUAL
PROPERTY"), except where the failure to so own or have the right to use such
Intellectual Property would not, individually or in the aggregate, have a
Material Adverse Effect. Except as set forth on SCHEDULE 8.24, to the best
knowledge of Borrower, no claim is pending that any Company is engaging in any
activity that infringes upon the intellectual property rights of any other
Person, except for any such claim that would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth on SCHEDULE 8.24,
to the best knowledge of Borrower, no claim is pending that any Intellectual
Property is invalid or unenforceable, except Permitted Liens, except for any
such claim that would not, individually or in the aggregate, have a Material
Adverse Effect.
Except as set forth in SCHEDULE 8.24, each Company owns or has the
right to use all Intellectual Property in the continued operation of its
business as presently conducted and the consummation of the transactions
contemplated hereby will not impair such ownership of right to use in a manner
that would, individually or in the aggregate, have a Material Adverse Effect.
Subject to the rights of third parties set forth in SCHEDULE 8.24, all
Intellectual Property is free and clear of all Liens except such as would not,
individually or in the aggregate, have a Material Adverse Effect.
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8.25. EXISTING INDEBTEDNESS. SCHEDULE 8.25(A) sets forth a true and
complete list of all Indebtedness of the Companies outstanding as of the
Effective Date and SCHEDULE 8.25(B) sets forth a true and complete list of all
Indebtedness of the Companies as of the Closing Date that is to remain
outstanding after the Closing Date (excluding the Obligations hereunder), in
each case showing the aggregate principal amount thereof and the name of each
respective borrower and any other entity that directly or indirectly guaranteed
such Indebtedness.
Section 9. COVENANTS. Each Obligor, for itself and on behalf of its
Subsidiaries, covenants and agrees with the Creditors that, so long as any
Commitment, Loan or L/C Liability is outstanding and until payment in full of
all amounts payable by Borrower hereunder (and each Obligor covenants and agrees
that it will cause its Subsidiaries to observe and perform the covenants herein
set forth applicable to any such Subsidiary):
9.01. FINANCIAL STATEMENTS, ETC. Borrower shall deliver to
Administrative Agent and each of the Lenders:
(a) QUARTERLY FINANCIALS. As soon as available and in any event within
50 days after the end of each of the first three quarterly fiscal periods
of each fiscal year beginning with the fiscal quarter ending March 31,
1999, consolidated statements of operations for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, a consolidated statement of cash flows for the period from the
beginning of the respective fiscal year to the end of such period, and the
related consolidated balance sheet of Consolidated Companies as at the end
of such period, setting forth in each case in comparative form the
corresponding consolidated statements of operations and cash flows for the
corresponding period in the preceding fiscal year to the extent such
financial statements are available, accompanied by a certificate of a
Responsible Officer of Borrower, which certificate shall state that said
consolidated financial statements fairly present in all material respects
the consolidated financial position, results of operations and cash flows
of Consolidated Companies in accordance with GAAP as at the end of, and
for, such period (subject to normal year-end audit adjustments) and except
for the absence of footnotes;
(b) ANNUAL FINANCIALS. As soon as available and in any event within 95
days after the end of each fiscal year beginning with the fiscal year
ending December 31, 1999, consolidated statements of operations, cash flows
and stockholders' equity of Consolidated Companies for such year and the
related consolidated balance sheet of Consolidated Companies as at the end
of such year, setting forth in each case in comparative form the
corresponding consolidated information as of the end of and for the
preceding fiscal year to the extent such financial statements are available
and accompanied by an unqualified opinion (without an explanatory paragraph
related to Borrower's ability to continue as a going concern or similar
circumstances, and without an exception as to scope) thereon of
PricewaterhouseCoopers LLP or other independent certified public
accountants of recognized national standing reasonably acceptable to Joint
Lead Arrangers and the Majority Lenders, which opinion shall state that
said consolidated financial statements fairly present in all material
respects the consolidated financial position, results of operations and
cash flows of Consolidated Companies as at the end of, and for, such fiscal
year in accordance with GAAP;
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(c) AUDITOR'S CERTIFICATE; COMPLIANCE CERTIFICATE.
(i) concurrently with the delivery of the financial statements
referred to in Section 9.01(b), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Event of Default relating to the Financial
Maintenance Covenants, except as specified in such certificate; and
(ii) at the time it furnishes each set of financial statements
pursuant to paragraph (a) or (b) above, (1) a certificate of a
Responsible Officer of Borrower (I) to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and describing the
action that the Companies have taken and propose to take with respect
thereto) and (II) setting forth in reasonable detail the computations
necessary to determine whether each Company is in compliance with
Section 9.11 as of the end of the respective quarterly fiscal period or
fiscal year and (2) any final accountants' management letters delivered
by the independent certified public accountants reporting on such
financial statements to any Company;
(d) OTHER FINANCIAL INFORMATION. Promptly (A) upon delivery thereof to
the holders of any debt securities or the stockholders of any Company
generally, copies of all financial statements and reports and proxy
statements so delivered, and promptly after the same are filed, copies of
all financial statements and reports which Borrower may make to or file
with the Commission or any successor or analogous Governmental Authority
and (B) upon delivery to any Company, copies of all material financial
statements or other material financial information provided by SBCL or any
of its Affiliates since the Effective Date pursuant to the SBCL Acquisition
Agreement;
(e) INTEREST RATE CERTIFICATES. From and after the Trigger Date,
together with the financial statements delivered pursuant to clause (a) or
(b) of this Section 9.01, an Interest Rate Certificate;
(f) NOTICE OF DEFAULT. Promptly after Borrower knows that any Default
has occurred or that any Company is in breach or violation of any term or
provision of any Contractual Obligation, a notice of such Default, breach
or violation describing the same in reasonable detail and a description of
the action that the Companies have taken and propose to take with respect
thereto except for any such breach or violation which could not reasonably
be expected to have a Material Adverse Effect;
(g) ENVIRONMENTAL MATTERS. Written notice of any Environmental Claim
materially affecting any Company, any Mortgaged Real Property or the
operations of any Company and any notice from any Person of (i) the
occurrence of any release, spill or discharge of any Hazardous Material
that is reportable under any Environmental Law, (ii) the commencement of
any clean-up pursuant to or in accordance with any Environmental Law of any
Hazardous Material at, on, under or within the Mortgaged Real Property or
any part thereof, (iii) any
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matters relating to Hazardous Materials or Environmental Laws that may
impair, or threaten to impair, Lenders' security interest in the Mortgaged
Real Property or any Obligor's ability to perform any of its obligations
under this Agreement when such performance is due or (iv) any other
condition, circumstance, occurrence or event which is reasonably likely to
have a Material Adverse Effect;
(h) AUDITORS' REPORTS. Promptly upon receipt thereof, copies of all
final written annual, interim or special reports issued to any Company by
independent certified public accountants in connection with each annual,
interim or special audit of such Company's books made by such accountants,
including any management letter commenting on any Company's internal
controls issued by such accountants to management in connection with their
annual audit (it being understood that this clause (h) does not apply to
audits of taxes, audits of benefit plans, statutory audits of Foreign
Subsidiaries or ordinary and routine audits of a similar nature);
(i) ANNUAL BUDGETS. As soon as practicable and in any event within 65
days after the beginning of each fiscal year of Borrower beginning after
the fiscal year ending December 31, 1999, a consolidated plan and financial
forecast for such fiscal year, including a forecasted consolidated balance
sheet and forecasted consolidated statements of income and cash flows of
the Companies for such fiscal year and for each quarter of such fiscal year
(other than any fiscal quarter after December 31, 2000), together with an
Officers' Certificate demonstrating pro forma compliance for such fiscal
year with Section 9.11 and stating that such plan and projections have been
prepared using assumptions believed in good faith by management of Borrower
to be reasonable at the time made;
(j) LIEN MATTERS; CASUALTY AND DAMAGE TO COLLATERAL. Prompt written
notice of (i) the incurrence of any Lien not expressly permitted by the
applicable Security Document on, or claim asserted against, any of the
Collateral, (ii) any Casualty Event or other insured damage to any material
portion of the Collateral or the commencement of any Proceeding likely to
result in a Casualty Event or (iii) the occurrence of any other event which
is reasonably likely to materially adversely affect the aggregate value of
the Collateral;
(k) NOTICE OF MATERIAL ADVERSE EFFECT. Written notice of the occurrence
of any Material Adverse Effect;
(l) ERISA INFORMATION. Promptly upon the occurrence of any ERISA Event
that, alone or together with any other ERISA Events that have occurred,
could result in liability to the Companies in an aggregate amount exceeding
$2.5 million, a written notice specifying the nature thereof, what action
the Companies or other ERISA Entity have taken, are taking or propose to
take with respect thereto, and, when known, any action taken or threatened
by the Internal Revenue Service, Department of Labor, PBGC or Multiemployer
Plan sponsor with respect thereto;
(m) ERISA FILINGS, ETC. Upon request by Administrative Agent, copies
of: (i) each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) filed by any
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ERISA Entity with the Internal Revenue Service with respect to each Pension
Plan; (ii) the most recent actuarial valuation report for each Pension
Plan; (iii) all notices received by any ERISA Entity from a Multiemployer
Plan sponsor or any governmental agency concerning an ERISA Event; and (iv)
such other documents or governmental reports or filings relating to any
Employee Benefit Plan as Administrative Agent shall reasonably request; and
(n) MISCELLANEOUS. Promptly, such financial and other information with
respect to any Company (or, prior to the Closing Date, SBCL, if available
to any Company pursuant to the SBCL Acquisition Agreement) as any Creditor
may from time to time reasonably request.
9.02. LITIGATION, ETC. Borrower shall promptly give to Administrative
Agent and each Lender notice of all Proceedings, and (except to the extent that
any such notice would, in the reasonable opinion of outside counsel to Borrower,
waive attorney client privilege) any material development thereof, affecting any
Company, except Proceedings which would not have a Material Adverse Effect.
9.03. EXISTENCE; COMPLIANCE WITH LAW; PAYMENT OF TAXES; INSPECTION
RIGHTS; PERFORMANCE OF OBLIGATIONS; ETC. (A) Each Company shall (i) preserve and
maintain its legal existence and all of its material rights, privileges and
franchises other than if Borrower determines that the preservation or
maintenance thereof is no longer desirable in the conduct of the business of
such Company and the loss thereof is not materially disadvantageous to the
Lenders; PROVIDED, HOWEVER, that nothing in this Section 9.03 shall prohibit any
transaction expressly permitted under Section 9.06, (ii) except as would not
have a Material Adverse Effect, comply with all Requirements of Law, (iii)
except as would not have a Material Adverse Effect, timely file true, accurate
and complete Tax Returns required by all Governmental Authorities and pay and
discharge all Taxes prior to the date on which any material penalties attach
thereto (except for any such Tax the payment of which is being contested in good
faith and by proper proceedings and against which adequate reserves are being
maintained in accordance with GAAP); (iv) maintain all of its Properties used or
useful in its business in good working order and condition, ordinary wear and
tear excepted, except to the extent that the failure to do so would not have a
Material Adverse Effect; (v) permit representatives of any Creditor during
normal business hours and, except during the existence of any Default, upon
reasonable prior notice, to examine, copy and make extracts from its books and
records, to inspect its Properties, and to discuss its business and affairs with
its officers and employees, all to the extent reasonably requested by such
Creditor; (vi) upon reasonable notice, allow (with the presence of Borrower if
Borrower so elects to participate) Joint Lead Arrangers or any representative
chosen by the Majority Lenders to consult with Borrower's independent public
accountants and auditors with respect to the financial affairs of the Companies
and authorize such accountants to disclose to Joint Lead Arrangers or any
representative chosen by the Majority Lenders and the Lenders (and Joint Lead
Arrangers to the Creditors) any and all financial statements and other
supporting financial documents and schedules including copies of any management
letter with respect to the business, financial condition and other affairs of
the Companies; at the request of Joint Lead Arrangers or any representative
chosen by the Majority Lenders, Borrower shall deliver a letter addressed to
such accountants instructing them to comply with the provisions of this Section
9.03(vi); (vii) perform in all respects all of its Contractual Obligations,
except where such failure to so perform, singly or in the aggregate with all
other such failures, could not reasonably be expected to have a Material Adverse
Effect; and (viii) keep proper books of
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record and accounts, in which full and correct entries shall be made of all
financial transactions and the Property and business of each Company in
accordance with GAAP.
(B) If the Tender Offer is consummated, Borrower will promptly make or
cause to be made payment on all Existing Notes validly tendered in the Tender
Offer in accordance with all applicable Requirements of Law.
9.04. INSURANCE. (A) Borrower shall maintain, with financially sound
and reputable insurers, insurance including self insurance of the kinds and in
the amounts customarily insured against by companies of established repute
engaged in the same or similar business and similarly situated (including
business interruption insurance).
(B) At the reasonable request of Administrative Agent, all policies of
insurance required to be maintained by any Company must name Administrative
Agent on behalf of the Creditors, as mortgagee or loss payee (in the case of
property insurance) or additional insured (in the case of liability insurance),
as applicable, or certificate holder (in the case of workers' compensation
insurance) and must provide that no cancellation or non-renewal of the policies
will be made without thirty days' prior written notice to Administrative Agent
and if the insurance carrier shall have received written notice from
Administrative Agent of the occurrence and continuance of an Event of Default,
the insurance carrier shall pay all proceeds otherwise payable to any Company
under such policies directly to Administrative Agent.
(C) Borrower shall give immediate written notice of any loss paid in
excess of $10.0 million to the insurance carrier and to Administrative Agent.
(D) If at any time the area in which any Mortgaged Real Property is
located is designated (i) a "flood hazard area" in any Flood Insurance Rate Map
published by the Federal Emergency Management Agency (or any successor agency),
Borrower shall obtain flood insurance in such total amount as Administrative
Agent or the Majority Lenders may from time to time reasonably require (so long
as such requirement is reasonably grounded in applicable Requirements of Law),
and otherwise comply with the National Flood Insurance Program as set forth in
the Flood Disaster Protection Act of 1973, as amended from time to time, or (ii)
a "Zone 1" area, Borrower shall obtain earthquake insurance in such total amount
as Administrative Agent or the Majority Lenders may reasonably require (so long
as such requirement is reasonably grounded in applicable Requirements of Law).
9.05. LIMITATION ON LINES OF BUSINESS. No Company shall directly or
indirectly, engage to any extent material to Consolidated Companies in any line
or lines of business activity other than the businesses of the type conducted by
the Companies as of the Effective Date (after giving effect to the SBCL
Acquisition) or any other businesses reasonably related thereto.
9.06. LIMITATION ON FUNDAMENTAL CHANGES, ACQUISITIONS OR DISPOSITIONS.
No Company shall, directly or indirectly, in a single transaction or series of
transactions, (1) merge, consolidate or amalgamate with or into any Person, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), (2) effect any Acquisition, or (3) effect any Disposition, EXCEPT
that each of the following shall be permitted:
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(a) purchases and sales of Property and services in the ordinary course
of business;
(b) the pledge of the Collateral pursuant to the Security Documents and
the incurrence of (i) with respect to Collateral, any Lien permitted by the
Security Documents, and (ii) with respect to all other Property, any
Permitted Lien;
(c) so long as no Default then exists or would arise therefrom, the
merger, consolidation, dissolution or liquidation of (1) any Subsidiary
(other than a Receivables Co.) with or into (i) Borrower if Borrower shall
be the continuing or surviving corporation or (ii) any Qualified Subsidiary
if a Qualified Subsidiary shall be the continuing or surviving corporation,
and (2) any Non-Qualified Subsidiary (other than a Receivables Co.) with or
into any other Non-Qualified Subsidiary (other than a Receivables Co.);
(d) Dispositions by any Company (other than a Receivables Co.) to any
Qualified Company or by any Non-Qualified Subsidiary (other than a
Receivables Co.) to any other Non-Qualified Subsidiary (other than a
Receivables Co.);
(e) Dispositions of used, worn out, obsolete or surplus Property
(including resulting from integration of the businesses of SBCL) by any
Company in the ordinary course of business and the abandonment or other
Disposition of Intellectual Property that is, in the reasonable judgment of
Borrower, no longer economically practicable to maintain or useful in the
conduct of the business of the Companies taken as a whole; PROVIDED,
HOWEVER, that in each case the cash proceeds thereof, if any, shall, at
Borrower's option, be used to make a voluntary prepayment of Loans or be
reinvested in the business of a Company within one year of such
Disposition;
(f) the sale or discount without recourse of accounts receivable or
notes receivable arising in the ordinary course of business, or the
conversion or exchange of accounts receivable into or for notes receivable,
in each case in connection with the compromise or collection thereof and
not in connection with any financing transaction; PROVIDED, HOWEVER, that,
in the case of any Foreign Subsidiary, any such sale or discount may be
with recourse if such sale or discount is consistent with customary
practice in such Foreign Subsidiary's country of business and the aggregate
amount of any such recourse shall (to the extent such recourse is required
by GAAP to be included as Indebtedness on the consolidated balance sheet of
Consolidated Companies) be included in the determination of Indebtedness
for purposes of Section 9.08;
(g) so long as no Default then exists or would arise therefrom, any
Disposition (other than Excluded Dispositions and Contemplated
Dispositions) for fair market value so long as the gross proceeds from all
Dispositions since the Effective Date pursuant to this clause (g) do not
exceed $25.0 million; PROVIDED, HOWEVER, that the Net Available Proceeds
therefrom shall be applied as specified in Section 2.10(a)(iv);
(h) Acquisitions by any Qualified Company; PROVIDED, HOWEVER, that each
Acquisition under this Section 9.06(h) shall satisfy each of the following
conditions:
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(i) no Default then exists or would result therefrom;
(ii) after giving pro forma effect in accordance with GAAP to such
Acquisition, Borrower shall be in compliance with all covenants set
forth in Section 9.11 as of the Test Date immediately prior to the
consummation thereof (assuming, for purposes of Section 9.11, that such
Acquisition, and all other Permitted Acquisitions consummated since the
first day of the relevant measurement period for each financial
covenant set forth in Section 9.11 ending on or prior to the date of
such Acquisition, had occurred on the first day of such relevant
measurement period);
(iii) the board of directors of the acquired Person shall not have
indicated privately at the time of consummation of the Acquisition to
any Company or publicly its opposition to the consummation of such
Acquisition;
(iv) such Acquisition shall be effected through a Qualified
Company and the Person or business acquired shall at the time of
consummation of such Acquisition be merged or combined or consolidated
with or into a Qualified Company (so long as, with respect to Borrower,
Borrower is the surviving Company and each other survivor shall be a
Qualified Company) or shall be or become at the time of consummation
thereof a Qualified Company;
(v) Borrower shall have delivered to Joint Lead Arrangers and the
Lenders an Officers' Certificate at least (A) if any Hart-Scott-Rodino
filing is needed, 10 days prior to the date of consummation of such
Acquisition and (B) in each other event, 10 days after the date of
consummation of such Acquisition (but in any event not earlier than a
date which would result in the Test Date occurring on or immediately
prior to the consummation of such Acquisition being more than 135 days
prior to the date of consummation of such Acquisition) certifying that
(1) such Acquisition complies with this Section 9.06(h), and (2) such
Acquisition is not reasonably likely to have a Material Adverse Effect;
(vi) the Acquisition Consideration for such Acquisition shall not
exceed $80.0 million; and
(vii) the Acquisition Consideration for such Acquisition
(excluding not more than $100.0 million of Acquisition Consideration
paid for such Acquisition in the form of the issuance of Equity
Interests or Equity Rights of Borrower), together with the aggregate
amount of the Acquisition Consideration (excluding not more than $100.0
million of Acquisition Consideration paid for such Acquisition and for
all other Acquisitions since the Effective Date in the form of the
issuance of Equity Interests or Equity Rights of Borrower) for all
Acquisitions effected pursuant to this Section 9.06(h) since the
Effective Date, shall not exceed 15% of Net Worth immediately prior to
such Acquisition;
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(i) transfers resulting from any Casualty Event, PROVIDED, HOWEVER,
that the Net Available Proceeds therefrom shall be applied as specified in
Section 2.10(a)(i);
(j) licenses or sublicenses of software, Intellectual Property and
general intangibles and leases, licenses or subleases of other Property
which do not materially interfere with the business of Consolidated
Companies;
(k) any consignment arrangements or similar arrangements for the sale
of assets in the ordinary course of business of any Company;
(l) the making of Investments permitted by Section 9.09 and the
liquidation in the ordinary course of business of (A) Cash Equivalents and
(B) Investments made pursuant to clause (a) of the definition of Permitted
Investments;
(m) the SBCL Acquisition in accordance with the SBCL Acquisition
Agreement;
(n) so long as no Default then exists or would arise therefrom, Sale
and Leaseback Transactions not to exceed in the aggregate $10.0 million
since the Effective Date; PROVIDED, HOWEVER, that such Sale and Leaseback
Transaction involves a sale of Property by a Company solely for cash
consideration on terms not less favorable than would prevail in an
arm's-length transaction; PROVIDED, HOWEVER, that the Net Available
Proceeds of any such transaction shall be applied as specified in Section
2.10(a)(iv);
(o) any Contemplated Acquisition so long as effected substantially in
conformity with the terms therefor described in SCHEDULE 1.01(g) and so
long as satisfying each of the conditions set forth in Section
9.06(h)(i)-(v) as if consummated thereunder (with references therein to
Section 9.06(h) being deemed references to this Section 9.06(o));
(p) any Contemplated Disposition so long as effected substantially in
conformity with the terms thereof described in SCHEDULE 1.01(h); PROVIDED,
HOWEVER, that the Net Available Proceeds of any such transaction shall be
applied as specified in Section 2.10(a)(iv);
(q) the sale, transfer or discount of Accounts pursuant to any
Permitted Receivables Transaction; PROVIDED, HOWEVER, that the Net
Available Proceeds therefrom shall be applied as specified in Section 2.04
and Section 2.10(a)(iv); and
(r) Acquisitions by any Qualified Joint Venture.
No Company shall effect the Disposition of any Equity Interests of any
Subsidiary unless in compliance with the foregoing provisions and unless all
Equity Interests of such Subsidiary owned by the Companies are sold pursuant
thereto in accordance with the Credit Documents, upon which sale the Guarantee
by such Subsidiary shall be automatically deemed to be released (it being
understood that nothing contained in this sentence shall be deemed to permit any
Disposition otherwise prohibited by this Agreement).
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Subject to Section 12.04, to the extent the Majority Lenders waive the
provisions of this Section 9.06 with respect to the sale or other disposition of
any Collateral, or any Collateral is sold or otherwise disposed of as permitted
by this Section 9.06 (other than to any Company), such Collateral in each case
shall be sold or otherwise disposed of free and clear of the Liens created by
the Security Documents and Administrative Agent shall take such actions as are
appropriate in connection therewith. Upon the disposition of any item of
Collateral of any Company (including, without limitation, as a result of the
sale, in accordance with the terms of the Credit Documents, of the Company that
owns such Collateral) in accordance with the terms of the Credit Documents,
Administrative Agent will, at Borrower' expense, execute and deliver to such
Company such documents as such Company may reasonably request to evidence the
release of such item of Collateral from the assignment and security interest
granted under the Security Documents in accordance with the terms of the Credit
Documents.
9.07. LIMITATION ON LIENS AND NEGATIVE PLEDGES. No Company shall,
directly or indirectly, create, incur, assume or suffer to exist any Lien upon
or with respect to any of their respective Property, whether now owned or
hereafter acquired, except, with respect to Collateral, for Liens expressly
permitted by the applicable Security Document and with respect to all other
Property, EXCEPT for each of the following (which are herein collectively
referred to as "PERMITTED LIENS"):
(a) Excluded Existing Liens (excluding, however, following the Closing
Date, any such Excluded Existing Liens securing the Existing Credit
Facilities, which Liens shall be extinguished on the Closing Date);
(b) Permitted Customary Liens;
(c) Liens upon Property acquired after the Effective Date by any
Company, which Liens either (A) existed on such Property before the time of
its acquisition and was not created in anticipation thereof, or (B) was
created solely for the purpose of securing Indebtedness representing, or
incurred to finance or refinance, the cost of such Property or improvements
thereon; PROVIDED, HOWEVER, that (1) no such Lien shall extend to or cover
any Property of any Company other than the Property so acquired and
improvements thereon and proceeds thereof, (2) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed 100% of the
fair market value of such Property at the time it was acquired or
constructed and (3) the Indebtedness secured by any such Lien is permitted
by Section 9.08(f);
(d) Liens existing on any Property at the time such Property is
acquired or the owner thereof becomes a Subsidiary or is merged or
consolidated with or into a Subsidiary and, in each case, not created in
contemplation of or in connection with such event; PROVIDED, HOWEVER, that
(1) such Liens do not extend to any other Property of any Company and (2)
any Indebtedness secured by any such Lien is permitted by Section 9.08(g);
(e) Liens not otherwise permitted hereunder (on Property other than the
Collateral) securing obligations of any Company at any time not exceeding
(as to all of the Companies) in the aggregate $25.0 million;
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(f) Liens securing obligations under Swap Contracts with any Creditor
to the extent such Swap Contract relates to the Loans and only so long as
the Obligations are secured by the same collateral on at least a PARI PASSU
basis;
(g) Liens securing obligations in respect of Capital Leases solely on
Property (including improvements thereto and the proceeds thereof) subject
to such Capital Leases (including Capital Leases resulting from any Sale
and Leaseback Transaction permitted by Section 9.06(n)); PROVIDED, HOWEVER,
that such Capital Leases are permitted by Section 9.08(f);
(h) Liens created under the Credit Documents securing the Obligations;
(i) Liens arising in connection with buy/sell agreements related to
Equity Interests of any Person that is not a Wholly Owned Subsidiary;
(j) Liens securing Contingent Obligations permitted by clause (e) of
the definition of Permitted Obligations not exceeding (as to all of the
Companies) $5.0 million in aggregate amount at any time outstanding;
(k) Liens on Accounts or related assets of any Receivables Co. created
in connection with a Permitted Receivables Transaction;
(l) Liens on accounts receivable of a Qualified Joint Venture to secure
a working capital facility of a Qualified Joint Venture; and
(m) any extension, renewal or replacement of the foregoing; PROVIDED,
HOWEVER, that the Liens permitted by this Section 9.07(m) shall not cover
any additional principal amount of Indebtedness or Property (other than
like Property substituted for Property covered by such Lien).
Except with respect to (i) specific Property encumbered pursuant to a
Lien permitted to be incurred pursuant to this Section 9.07 or (ii) specific
Property to be sold pursuant to any Disposition or Excluded Disposition
permitted hereby, no Company will directly or indirectly, enter into or suffer
to exist any Contractual Obligation on or after the Effective Date prohibiting
or restricting in any manner (directly or indirectly and including by way of
covenant, representation or warranty or event of default) the creation or
assumption of any Lien upon its Property, whether now owned or hereafter
acquired, EXCEPT pursuant to (1) the Credit Documents, (2) any other agreement
that does not restrict in any manner (directly or indirectly) Liens created
pursuant to the Credit Documents on Property of any Company (whether now owned
or hereafter acquired) securing the Obligations and does not require the direct
or indirect granting of any Lien securing any Indebtedness or other obligation
by virtue of the granting of Liens on or pledge of Property of any Company to
secure the Obligations, and (3) any industrial revenue or development bonds,
acquisition agreements, or agreements in connection with any Permitted
Receivables Transaction permitted hereby (in which case, any prohibition or
limitation shall only be effective against the Property financed or acquired
thereby) or operating leases of Real Property entered into in the ordinary
course of business.
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9.08. PROHIBITION ON DISQUALIFIED CAPITAL STOCK; LIMITATION ON
INDEBTEDNESS AND CONTINGENT OBLIGATIONS; LIMITATION ON DESIGNATED SENIOR
INDEBTEDNESS. (A) No Company shall directly or indirectly issue or permit to be
outstanding any Disqualified Capital Stock. No Company shall, directly or
indirectly, incur or suffer to exist any Indebtedness or any Contingent
Obligation, EXCEPT for each of the following:
(a) the Loans and the other Obligations (including the Guarantees)
under the Credit Documents;
(b) the Existing Notes (so long as the Note Tender or Note Defeasance
if required pursuant to Section 7.02 has been effected), other Indebtedness
and Contingent Obligations (other than the Existing Notes) outstanding on
the Effective Date and listed in SCHEDULE 8.25(A) and specified on SCHEDULE
8.25(B) as to remain outstanding after the Effective Date (less the
aggregate amount of any permanent prepayments or repayments thereof) and,
in the case of any such Indebtedness listed on SCHEDULE 8.25(B), Permitted
Refinancings thereof;
(c) Indebtedness and Contingent Obligations of any Company (other than
any Receivables Co.) owing to any Qualified Company; PROVIDED, HOWEVER,
that such Indebtedness and Contingent Obligations shall not be held by any
Person other than a Qualified Company and shall not be subordinate to any
other Indebtedness or Contingent Obligations or other obligation of the
obligor unless also subordinated to the Obligations on terms no less
favorable to the Lenders than that of any other creditor;
(d) Contingent Obligations of any Qualified Company (other than any
Receivables Co.) in respect of Indebtedness or other liabilities of any
Qualified Company (other than a Receivables Co.) to the extent that the
existence of such Indebtedness or other liabilities is not prohibited under
this Agreement and on substantially similar terms as such Indebtedness;
(e) Permitted Obligations;
(f) Indebtedness and Contingent Obligations of the Companies (including
Permitted Refinancings thereof) secured by Liens permitted under Section
9.07(c) or (g) (and extensions, renewals or replacements thereof pursuant
to Section 9.07(m)) not exceeding in the aggregate at any time outstanding
for the Companies collectively (together with any Permitted Refinancing
thereof) the remainder of (I) $30.0 million MINUS (II) the aggregate amount
of Indebtedness outstanding under Sections 9.08(A)(g) and 9.08(A)(h);
(g) Indebtedness of a Person that becomes a Subsidiary after the
Effective Date; PROVIDED, HOWEVER, that (1) such Indebtedness existed at
the time such Person became a Subsidiary and was not created in connection
with or in anticipation thereof, (2) immediately after giving effect to the
acquisition of such Person by Borrower no Default shall have occurred and
be continuing, and (3) the aggregate amount of Indebtedness outstanding at
any time pursuant to this Section 9.08(A)(g) for all Subsidiaries shall not
exceed the remainder of (I) $30.0 million MINUS (II) the aggregate amount
of Indebtedness outstanding under Sections 9.08(A)(h) and 9.08(A)(f);
<PAGE>
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(h) Indebtedness and Contingent Obligations incurred by any Company,
and any Permitted Refinancing thereof, not exceeding in the aggregate at
any time outstanding for all Companies the remainder of (I) $30.0 million
MINUS (II) the aggregate amount of Indebtedness outstanding pursuant to
Sections 9.08(A)(f) and 9.08(A)(g);
(i) Indebtedness of any Receivables Co. incurred in connection with a
Permitted Receivables Transaction consisting of (i) Indebtedness in an
aggregate amount at any time not to exceed $300.0 million and (ii) other
Indebtedness owing by a Receivables Co. to any Company on terms
satisfactory to Joint Lead Arrangers; PROVIDED, HOWEVER, that in the case
of clause (i) of this Section 9.08(A)(i), the Net Available Proceeds
therefrom shall be applied as specified in Section 2.04 and Section
2.10(a)(iii);
(j) debt securities issued by Borrower substantially on terms no less
favorable to Borrower than the Existing Notes (including any guarantees
thereof by any Qualified Subsidiary so long as a Qualified Subsidiary) and
otherwise on terms and conditions reasonably acceptable to Joint Lead
Arrangers and the Majority Lenders and any Permitted Refinancing thereof,
not to exceed in the aggregate at any time outstanding $600.0 million, (i)
which shall be unsecured, have no interim amortization and have a final
maturity date not earlier than December 31, 2007 and (ii) the first $300.0
million of which shall consist of senior subordinated notes unless, on a
pro forma basis after giving effect to the Transactions, the unsecured
senior long term debt of Borrower is rated greater than or equal to Ba1 by
Moody's and BB+ by S&P, in each case issued pursuant to the Unsecured Note
Documents and may include any unsecured notes issued pursuant to a
registered exchange offer (an "EXCHANGE OFFER") therefor made pursuant to a
registration rights agreement entered into in connection with the issuance
thereof on the date of issuance thereof ("EXCHANGE Notes"); PROVIDED,
HOWEVER, that (1) the remainder of the Net Available Proceeds thereof less,
so long as no Default or Event of Default then exists or would arise
therefrom, the amount of the Net Available Proceeds therefrom applied to
effect any Permitted Refinancing of the Existing Notes or any such debt
securities, shall be applied as specified in Section 2.04 and Section
2.10(a)(iii), and (2) the aggregate principal amount of debt securities
that shall be permitted to be outstanding under this Section 9.08(A)(j)
shall be reduced by the aggregate principal amount of Existing Notes
outstanding more than 45 days after the most recent date on which
Indebtedness was incurred under this Section 9.08(A)(j) so long as such
Existing Notes are outstanding;
(k) so long as no Default then exists or would arise therefrom,
Guaranty Obligations in respect of third-party loans and advances to
directors, officers or employees of any Company and, in the case of loans
or advances to finance the purchase of common stock of Borrower, to the
immediate family members or relatives thereof, or trusts or partnerships
for the benefit of any of the foregoing, or any of their heirs, executors,
or legal representatives, (i) for travel and entertainment expenses
incurred in the ordinary course of business, (ii) for relocation expenses
incurred in the integration of SBCL's businesses into the businesses of the
Companies or otherwise incurred in the ordinary course of business or (iii)
for any other purpose and, in the case of this clause (iii), in an
aggregate principal amount (as to Borrower and all its Subsidiaries),
together with the aggregate amount of all Investments permitted under
Section 9.09(A)(d)(1), of up to $10.0 million outstanding at any time in
excess of such Guaranty
<PAGE>
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Obligations existing on the date hereof and set forth on SCHEDULE 8.25(B),
plus the net cash proceeds received by Borrower since the Effective Date
from the issuance or sale of Equity Interests of Borrower (including any
Equity Rights in respect thereof) to any such Person;
(l) Guaranty Obligations of any Company in respect of recourse events
in connection with any Permitted Receivables Transaction;
(m) so long as no Default then exists or would arise therefrom,
Guaranty Obligations (including any Letters of Credit issued hereunder in
respect of the purchase of goods or services by any Joint Venture) in
respect of Indebtedness and other obligations of a Joint Venture and as to
all such Persons does not at any time exceed $25.0 million in aggregate
principal amount in excess of such Guaranty Obligations existing on the
date hereof and set forth on SCHEDULE 8.25(B); PROVIDED, HOWEVER, that such
amount shall be reduced by the aggregate amount of then existing
Investments permitted by Section 9.09(A)(k);
(n) so long as no Default then exists or would arise therefrom,
Indebtedness of a Qualified Joint Venture; PROVIDED, HOWEVER, that the
aggregate principal amount of Indebtedness permitted by this Section
9.08(A)(n) shall not at any time exceed $12.0 million for any Qualified
Joint Venture or $25.0 million in the aggregate for all Qualified Joint
Ventures; and
(o) Guaranty Obligations entered into in the ordinary course of
business in respect of operating leases and other ordinary course contracts
(other than any contract or agreement related to Indebtedness or Contingent
Obligations in respect of Indebtedness or any non-ordinary course contract)
of any Foreign Subsidiary.
All intercompany debt shall be unsecured and subordinate in right of
payment (to the same extent as the subordination provisions set forth in EXHIBIT
B hereto) to the Obligations. Each Obligor, by its execution and delivery of
this Agreement, hereby agrees to subordinate its right of payment under any
intercompany debt owed to it by any Company to the full and complete payment and
performance of the Obligations. No Obligor shall incur any Subordinated Debt
unless otherwise permitted by the foregoing exceptions listed as clauses (a)
through (o) above and unless such Subordinated Debt shall be subordinated to the
Obligations at least to the same extent and for so long as such Subordinated
Debt is subordinated to any other Indebtedness.
(B) No Company shall designate, or permit or suffer to exist the
designation of, any Indebtedness or other obligation, other than Indebtedness
under the Credit Documents, as "Designated Senior Indebtedness," as such term
may be defined in any Subordinated Debt, or effect or permit or suffer to exist
any comparable designation that confers upon the holders of such Indebtedness or
other obligation (or any Person acting on their behalf) the right to initiate
payment blockage periods under any Subordinated Debt.
9.09. LIMITATION ON INVESTMENTS; LIMITATION ON CREATION OF
SUBSIDIARIES. (A) No Company shall, directly or indirectly, make or permit to
remain outstanding any Investments, EXCEPT for each of the following:
<PAGE>
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(a) Permitted Investments and Investments that were Permitted
Investments when made;
(b) Investments in any Qualified Company or in any Subsidiary if as a
result thereof or in connection therewith such Subsidiary becomes a
Qualified Subsidiary and Investments by any Non-Qualified Subsidiary (other
than any Receivables Co.) in any Company or in any Person not a Subsidiary
if as a result thereof or in connection therewith such Person becomes a
Subsidiary (provided that no Investment will be permitted in respect of any
Subsidiary with respect to which Borrower has not complied with Section
9.20);
(c) any Investments outstanding on the Effective Date (and, to the
extent in excess of $1.0 million, identified in SCHEDULE 9.09) and any
renewals, amendments and replacements thereof that do not increase the
amount thereof;
(d) so long as no Default then exists or would arise therefrom,
advances, loans or extensions of credit to (1) officers, directors or
employees of any Company and, in the case of loans and advances to finance
the acquisition of common stock of Borrower, to immediate family members or
relatives thereof, or trusts or partnerships for the benefit of any of the
foregoing, or any of their heirs, executors, or legal representatives, (i)
in the ordinary course of business for travel and entertainment or
relocation expenses in the ordinary course of business or relocation
expenses in connection with the integration of SBCL's businesses into the
businesses of the Companies, (ii) existing on the Effective Date and
described in SCHEDULE 9.09, (iii) made after the Effective Date for other
purposes, not to exceed (as to all Companies), together with the amount of
all Guaranty Obligations permitted pursuant to Section 9.08(A)(k), $10.0
million in the aggregate outstanding at any time in excess of such
Investments existing on the date hereof and described in SCHEDULE 9.09,
plus the net cash proceeds received by Borrower since the Effective Date
from the issuance or sale of Equity Interests of Borrower (including any
Equity Rights in respect thereof) to any such Person and (iv) relating to
indemnification or reimbursement of any current or former officers,
directors or employees in respect of liabilities relating to their serving
in any such capacity or as otherwise specified in Section 9.15, and (2)
current or former officers, directors or employees of any Company in
connection with stock option plans so long as (x) such loans do not involve
cash payments by any Company and (y) no Company incurs any obligations at
any time to repurchase the stock so purchased;
(e) additional Investments in any Non-Qualified Subsidiary to the
extent that such Investments reflect an increase in the stockholders'
equity of such Subsidiary resulting from retained earnings of such
Subsidiary;
(f) so long as no Default shall have occurred and be continuing,
Investments in any Non-Qualified Subsidiary to the extent made in the
ordinary course to fund or support the ordinary course operations of such
Subsidiary; PROVIDED, HOWEVER, that (1) other than with respect to any
Subsidiary of which not less than 85% of the Equity Interests are owned
directly or indirectly by Borrower, the amount of such Investments made
pursuant to this clause (f) shall not exceed $10.0 million in the aggregate
(plus amounts representing return of capital)
<PAGE>
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outstanding at any time (without giving effect to any write-down or
write-off thereof) in excess of such Investments existing as of the date
hereof and described in SCHEDULE 9.09, and (2) no such Investment shall be
permitted which singularly or in the aggregate will result in all or a
substantial part of the assets of the Qualified Companies being transferred
to Non-Qualified Subsidiaries;
(g) the ownership of Equity Interests of any Subsidiary existing on the
Effective Date or created or acquired thereafter in accordance with the
provisions hereof and any additional Equity Interests issued in exchange
therefor or as a dividend thereon;
(h) Investments consisting of non-cash consideration received in the
form of securities, notes or similar obligations in connection with any
Disposition or Excluded Disposition (which shall not be subordinated by its
terms to any obligations of the issuer thereof); PROVIDED, HOWEVER, that
(1) the aggregate amount of such non-cash consideration received in
connection with any such Disposition shall not exceed 25% of the total
consideration received in connection with such Disposition, (2) such
non-cash consideration is pledged pursuant to the appropriate Security
Document (other than if received by any Foreign Subsidiary), and (3) the
aggregate amount of such Investments made and outstanding at any time shall
not exceed $25.0 million (without giving effect to any write-downs or
write-offs thereof);
(i) Investments consisting of or made in order to consummate Permitted
Acquisitions;
(j) any Investment which, in the judgment of such Company, is
reasonably necessary in connection with, and pursuant to, any Permitted
Receivables Transaction;
(k) so long as no Default then exists or would arise therefrom,
Investments in a Person in connection with a Joint Venture in an aggregate
amount (after giving effect to any repayments or other realized returns on
prior Investments made under this Section 9.09(A)(k)) not to exceed at any
one time outstanding an amount equal to $25.0 million PLUS the amount of
cash distributed to Qualified Companies by Joint Ventures not otherwise
replenishing such $25.0 million in an amount not to exceed an additional
$25.0 million; PROVIDED, HOWEVER, that such amount shall be reduced by the
aggregate amount of the outstanding Guaranty Obligations permitted by
Section 9.08(A)(m);
(l) Investments made by any Joint Venture to effect any Acquisition
permitted by Section 9.06(r);
(m) Contemplated Investments (however, any such Investment made with
the cash proceeds of any Contemplated Disposition shall be made only in a
Qualified Company);
(n) any investment in the entity being formed by SmithKline Beecham
pursuant to the Category Three Data Access Agreement between Borrower and
SmithKline Beecham dated as of the Closing Date or in any other Person (or
an Affiliate thereof) to which Borrower provides information products or
services or a license to use (or to which Borrower
<PAGE>
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discloses) clinical laboratory data of Borrower, which Investment is issued
or received (a) in exchange for the sale of such information products or
services or the license (or disclosure) of the data or (b) for cash in an
amount not to exceed the sum of $20.0 million in the aggregate under this
clause (b) plus the amount of cash fees received by Borrower or its
Subsidiaries after the Closing Date from the sale to such entity or Person
(or an Affiliate thereof) of information products or services or the
license (or disclosure) of clinical laboratory data of Borrower; and
(o) so long as no Default then exists or would arise therefrom,
Investments not otherwise permitted by this Section 9.09 in an aggregate
amount outstanding at any time not to exceed $10.0 million for all
Companies (PLUS amounts representing return of capital) (exclusive of any
write-down or write-off thereof).
In the case of any Investment by a Company in any Receivables Co., such
Investment shall only be made in connection with a Permitted Receivables
Transaction on terms satisfactory to Joint Lead Arrangers.
(B) No Company shall, directly or indirectly, create or acquire any
Subsidiary without the prior written consent of the Majority Lenders, which
consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that (1) the
provisions of this Section 9.09(B) shall not require the Majority Lenders'
consent for (I) the creation or acquisition of direct or indirect Wholly Owned
Subsidiaries so long as Section 9.20 is complied with at the time of formation
or acquisition thereof and such creation or acquisition is otherwise permitted
under Section 9.09(A) and (II) the creation or acquisition of any Subsidiary
which is not a Wholly Owned Subsidiary so long as the Investment made in
connection therewith complies with Section 9.09(A) and so long as Section 9.20
is complied with at the time of formation or acquisition thereof; and (2) all
Investments in any Subsidiary, including in connection with the creation or
acquisition thereof, must comply with Section 9.09(A).
9.10. LIMITATION ON DIVIDEND PAYMENTS. No Company shall, directly or
indirectly, declare or make any Dividend Payment at any time, EXCEPT, without
duplication:
(a) any Subsidiary may declare and make Dividend Payments to Borrower
or any Subsidiary and to minority interest holders in such Subsidiary if
made on a PRO RATA basis to all holders of Equity Interests in such
Subsidiary at the same time except that no Qualified Subsidiary may make
any Dividend Payment to any Non-Qualified Subsidiary; and
(b) So long as no Default has occurred and is continuing or would arise
therefrom:
(i) the payment of dividends on the Voting Cumulative Preferred
Stock outstanding on the Effective Date pursuant to documentation
existing on the Effective Date not to exceed $150,000 per year and the
repurchase or redemption of the Voting Cumulative Preferred Stock for a
purchase price not exceeding $1.06 million plus accrued and unpaid
dividends;
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(ii) Dividend Payments to redeem Equity Interests (other than
Disqualified Capital Stock) held by current or former employees,
officers or directors of any Company (or their estates or beneficiaries
of their estates) upon the death, disability, retirement or termination
of employment or directorship, as the case may be, pursuant to any
agreement in effect on the Effective Date as in effect on the Effective
Date and pursuant to other agreements on substantially similar terms
entered into after the Effective Date; PROVIDED, HOWEVER, that the
aggregate cash consideration paid, or distributions made, pursuant to
this clause (b)(ii) shall not exceed $5.0 million in any fiscal year
ending after the Effective Date, PLUS, in each case, the proceeds of
any Excluded Equity Issuance pursuant to clause (c) of the definition
thereof;
(iii) any purchase or other acquisition of common stock of
Borrower that is contributed to any Employee Benefit Plan to the extent
funded by employee contributions or deducted as an expense in
determining Adjusted Net Income of Borrower; and
(iv) Borrower may repurchase shares of its common stock to be
contributed to Employee Benefit Plans (or to replace shares contributed
after the date hereof to Employee Benefit Plans out of authorized but
unissued shares), in an aggregate amount not to exceed any cash
consideration received by Borrower in respect of the issuance of shares
of its common stock to employees.
9.11. FINANCIAL COVENANTS.
(a) MAXIMUM TOTAL LEVERAGE RATIO. The Total Leverage Ratio shall not,
as of any Test Date during any period set forth in the table below, exceed the
ratio set forth opposite such period in the table below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
9/30/99 to 3/30/00 5.00x
3/31/00 to 9/29/00 4.75x
9/30/00 to 12/30/01 4.50x
12/31/01 to 12/30/02 3.75x
12/31/02 to 12/30/03 3.00x
12/31/03 and thereafter 2.50x
</TABLE>
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(b) MINIMUM INTEREST COVERAGE RATIO. The Interest Coverage Ratio shall
not, as of any Test Date during any period set forth in the table below, be less
than the ratio set forth opposite such period in the table below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
9/30/99 to 12/30/00 2.25x
12/31/00 to 12/30/01 2.50x
12/31/01 to 12/30/02 3.00x
12/31/02 and thereafter 3.50x
</TABLE>
(c) MINIMUM FIXED CHARGE COVERAGE RATIO. The Fixed Charge Coverage
Ratio shall not, as of any Test Date during any period set forth in the table
below, be less than the ratio set forth opposite such period in the table below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
9/30/99 to 12/30/01 1.10x
12/31/01 to 12/30/02 1.15x
12/31/02 to 12/30/03 1.20x
12/31/03 to 12/30/04 1.20x
12/31/04 to 12/30/05 1.20x
12/31/05 and thereafter 1.00x
</TABLE>
(d) MINIMUM NET WORTH. Borrower will not permit Net Worth at any Test
Date to be less than (i) 85% of Borrower's Net Worth at the Closing Date after
giving effect to the SBCL Acquisition PLUS (ii) 75% of the sum of Adjusted Net
Income for each fiscal quarter beginning with the first fiscal quarter after the
Closing Date (without reduction for losses) PLUS (iii) 75% of Equity Proceeds
received by Borrower after the Closing Date from each Equity Issuance.
Notwithstanding the foregoing, if at any Test Date the unsecured senior long
term debt of Borrower is rated at least Baa3 (or the equivalent) or higher by
Moody's and at least BBB- (or the equivalent) or higher by S&P, Borrower need
not comply with this covenant at such Test Date.
(e) LIMITATION ON CAPITAL EXPENDITURES. The aggregate amount of Capital
Expenditures made by the Companies in any period set forth below shall not
exceed the amount set forth opposite such period below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Effective Date - 6/30/2000 $135,000,000
7/1/2000 - 12/31/2000 $ 55,000,000
1/1/2001 - 12/31/2001 $110,000,000
1/1/2002 - 12/31/2002 $110,000,000
1/1/2003 - 12/31/2003 $115,000,000
1/1/2004 - 12/31/2004 $120,000,000
</TABLE>
<PAGE>
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<TABLE>
<S> <C>
1/1/2005 - 12/31/2005 $125,000,000
1/1/2006 - 12/31/2006 $130,000,000
1/1/2007 - 12/31/2007 $135,000,000
</TABLE>
; PROVIDED, HOWEVER, that (x) if the aggregate amount of Capital Expenditures
for any period set forth above shall be less than the amount permitted for such
period, then the shortfall may be added to the amount of Capital Expenditures
permitted for the immediately succeeding (but not any other) period set forth
above to the extent that the amount expended in such immediately succeeding
period set forth above would not exceed 125% (or 145% with respect to the period
from 7/1/2000 to 12/31/2000) of the amount permitted for such immediately
succeeding period set forth above (before any carryover and the addition
pursuant to clause (y) below) and (y) the amount expended in any period set
forth above shall be increased by an amount equal to 20% of the positive amount
of the most recent trailing four quarter EBITDA of any Permitted Acquisition
consummated by any Qualified Company during such period.
(f) LIMITATION ON OPERATING LEASES. No Company shall permit the
aggregate lease payments calculated in accordance with GAAP (including, without
limitation, any property taxes paid as additional rent or lease payments) by
Companies on a consolidated basis under any agreement to rent or lease any
Property (or any extension or renewal thereof) (excluding Capital Leases plus
any lease payments made in connection with any Sale and Leaseback Transaction
permitted by Section 9.06) to exceed in any fiscal year (commencing with fiscal
1999) $125.0 million.
9.12. EQUAL SECURITY FOR LOANS AND NOTES; PLEDGE OR MORTGAGE OF REAL
PROPERTY; LANDLORD CONSENTS. (A) If any Company (excluding each Excluded Entity
and each Receivables Co.) shall create or assume any Lien upon any of its
Property, whether now owned or hereafter acquired and whether or not such
Property constitutes Collateral, other than any Lien permitted by the Credit
Documents, it shall make or cause to be made effective provisions whereby the
Obligations will be secured by such Lien equally and ratably with any and all
other Indebtedness thereby secured so long as any such Indebtedness shall be
secured; PROVIDED, HOWEVER, that this covenant shall not be construed as consent
by any Creditor to any violation by any Company of the provisions of Section
9.07.
(B) If, after the Closing Date, any Company (excluding each Excluded
Entity and each Receivables Co.) acquires or holds an interest in Real Property
with a fair market value in excess of $20.0 million and such Real Property is
not subject to a Lien permitted under Section 9.07(c), such Company shall notify
Administrative Agent and, if requested by Majority Lenders or Administrative
Agent, (i) take such actions and execute such documents as Administrative Agent
or the Majority Lenders shall reasonably require to confirm the Lien of an
existing Mortgage, if applicable, or to create a new Mortgage on such additional
Real Property and (ii) cause to be delivered to Administrative Agent, on behalf
of the Creditors, all documents and instruments reasonably requested by
Administrative Agent or as shall be necessary in the opinion of counsel to the
Lenders to create a valid perfected first priority mortgage in such Mortgaged
Real Property, including, the following:
(i) a Mortgage in favor of Administrative Agent, for the benefit of the
Creditors, in form for recording in the recording office of each
jurisdiction where such Mortgaged Real Property is situated, together with
such other documentation as shall be required to create a
<PAGE>
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Lien under applicable law, which Mortgage and other documentation shall be
satisfactory to Administrative Agent and shall be effective to create a
first priority Lien on such Mortgaged Real Property subject to no Liens
other than Prior Liens; and
(ii) the approvals, documents, instruments, opinions and Officers'
Certificates set forth on SCHEDULE 9.12.
If reasonably requested by Joint Lead Arrangers or the Majority
Lenders, Borrower shall obtain at its sole expense and as soon as practicable
but in any event not later than 45 days after request therefor, environmental
assessments, including, if necessary, Phase 1 or Phase 2 environmental reports
from an environmental engineering firm reasonably acceptable to Joint Lead
Arrangers with respect to any Mortgaged Real Property held by any Company if not
delivered on or prior to the Closing Date.
(C) The costs of all actions taken by the parties in connection with
this Section 9.12, including reasonable costs of counsel for Administrative
Agent, shall be paid by the Obligors promptly following written demand.
9.13. SECURITY INTERESTS; FURTHER ASSURANCES. Each Qualified Company
shall, promptly, upon the reasonable request of Administrative Agent, at
Borrower's expense, execute, acknowledge and deliver, or cause the execution,
acknowledgment and delivery of, and thereafter register, file or record, or
cause to be registered, filed or recorded, in an appropriate governmental
office, any document or instrument supplemental to or confirmatory of the
Security Documents or otherwise deemed by Administrative Agent reasonably
necessary or desirable for the continued validity, perfection and priority of
the Liens on the Collateral covered thereby superior to and prior to the rights
of all third Persons other than the holders of Prior Liens and subject to other
Liens except as permitted by the Security Documents, or obtain any consents,
including, without limitation, landlord or similar lien waivers and consents, as
may be necessary or appropriate in connection therewith. Each Company shall
deliver or cause to be delivered to Administrative Agent from time to time such
other documentation, consents, authorizations, approvals and orders in form and
substance reasonably satisfactory to Administrative Agent as Administrative
Agent shall reasonably deem necessary to perfect or maintain the Liens on the
Collateral pursuant to the Security Documents. Upon the exercise by
Administrative Agent or the Lenders of any power, right, privilege or remedy
pursuant to any Credit Document which requires any consent, approval,
registration, qualification or authorization of any Governmental Authority, each
Company shall execute and deliver all applications, certifications, instruments
and other documents and papers that Administrative Agent or the Lenders may be
so required to obtain. If Administrative Agent or the Majority Lenders determine
that they are required by law or regulation to have appraisals prepared in
respect of the Real Property of any Obligor constituting Collateral, Borrower
shall provide to Administrative Agent, at Borrower's expense, appraisals that
satisfy the applicable requirements of the Real Estate Appraisal Reform
Amendments of FIRREA and are in form and substance satisfactory to
Administrative Agent.
9.14. COMPLIANCE WITH ENVIRONMENTAL LAWS. Each Company shall (a) comply
with all Environmental Laws, and will keep or cause all Real Property to be kept
free of any Liens under Environmental Laws, unless failure to do so would not
reasonably be expected to have a Material Adverse Effect; (b) in the event of
any Hazardous Material at, on, under or emanating from any Real Property which
would reasonably be expected to result in liability under or a violation of any
Environmental Law in each case which would reasonably be expected to have a
Material Adverse
<PAGE>
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Effect, undertake, and/or cause any of their respective tenants or occupants to
undertake, at their sole expense, any action required pursuant to Environmental
Laws to mitigate and eliminate such condition; PROVIDED, HOWEVER, that no
Company shall be required to comply with any order or directive which is being
contested in good faith and by proper proceedings so long as it has maintained
adequate reserves with respect to such compliance to the extent required in
accordance with GAAP; (c) promptly notify Administrative Agent of any event
specified in clause (b) of this Section and periodically thereafter keep
Administrative Agent informed of any material actions taken in response to such
event and the results thereof; and (d) at the written request of Administrative
Agent, provide, at such Company's sole expense, an environmental site assessment
(including, without limitation, the results of any groundwater or other testing,
conducted at Administrative Agent's request) concerning any Real Property now or
hereafter owned, leased or operated by any Company, conducted by an
environmental consulting firm proposed by such Obligor and approved by
Administrative Agent indicating the presence or absence of Hazardous Materials
and the potential cost of any required action in connection with any Hazardous
Materials on, at, under or emanating from such Real Property; PROVIDED, HOWEVER,
that such request may be made only if (i) there has occurred and is continuing
an Event of Default, or (ii) circumstances exist that reasonably could be
expected to form the basis of an Environmental Claim against such Company or any
such Real Property which would have a Material Adverse Effect; if any Company
fails to provide the same within 60 days after such request was made,
Administrative Agent may but is under no obligation to conduct the same, and
such Company shall grant and hereby grants to Administrative Agent and its
agents access to such Real Property and specifically grants Administrative Agent
an irrevocable non-exclusive license, subject to the rights of tenants, to
undertake such an assessment, all at such Company's sole cost and expense.
9.15. LIMITATION ON TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS.
No Company shall, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any Property, the rendering of any service, or a merger, Acquisition
or other consolidation), with or for the benefit of any Affiliate or any Related
Person (an "AFFILIATE TRANSACTION") unless such Affiliate Transaction is
otherwise not prohibited under this Agreement and is (i) between or among
Companies, (ii) is between or among a Company (on the one hand) and one or more
Wholly Owned Subsidiaries or one or more Qualified Joint Ventures the Equity
Interests in which that are not owned by a Company or a Joint Venture Holding
Company (that is a Wholly Owned Subsidiary) are not owned by any Affiliate or
Related Person (other than another Company) (on the other hand), or (iii) on
fair and reasonable terms that are not less favorable to such Company than those
that are obtainable at the time in an arm's-length transaction with a Person
that is not such an Affiliate, EXCEPT that, notwithstanding the foregoing, each
of the following shall be permitted: (a) loans or advances to employees
permitted by Section 9.09(A)(d) and Dividend Payments permitted by Section 9.10;
(b) fees and compensation paid to, and customary indemnity and reimbursement
provided on behalf of, officers, directors and employees of any Company in the
ordinary course of business; (c) the SBCL Acquisition Agreement and each
agreement contemplated thereunder (including any registration rights agreement
or purchase agreement related thereto) as in effect on the Effective Date and
transactions and agreements in existence on the Effective Date and listed in
SCHEDULE 9.15 (as such agreements are in effect on the Effective Date, the
"EXISTING AFFILIATE AGREEMENTS")
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and any amendment thereto that is not disadvantageous to the Lenders in any
material respect; (d) any employment agreements entered into by any Company in
the ordinary course of business; and (e) any Permitted Receivables Transaction.
9.16. LIMITATION ON ACCOUNTING CHANGES; LIMITATION ON INVESTMENT
COMPANY STATUS. No Company shall make or permit any change in (i) accounting
policies or reporting practices, except immaterial changes and except as
required by generally accepted accounting principles except that SBCL and any
other Person that becomes a Qualified Company after the Effective Date as a
result of a Permitted Acquisition may make such changes to conform to Borrower's
accounting principles and any Company may make accounting changes in connection
with the early adoption of pronouncements of the United States Financial
Accounting Standards Board or (ii) its fiscal year end (December 31 of each
year). No Obligor shall be or become an investment company subject to the
registration requirements under the United States Investment Company Act of
1940, as amended.
9.17. LIMITATION ON MODIFICATIONS OF CERTAIN DOCUMENTS, ETC. No Company
shall consent to any modification, supplement, waiver of, or termination of, or
amend, in any manner which could reasonably be expected to be materially adverse
to the Lenders, or result in a Material Adverse Change, any of the provisions of
any Organic Document, the SBCL Acquisition Agreement (or any agreement entered
into in connection therewith), any agreement or document relating to any
material Indebtedness or the Voting Cumulative Preferred Stock, or the
Supplemental Indenture.
9.18. INTEREST RATE PROTECTION AGREEMENTS. On or within 90 days after
the Closing Date, not less than 50% of the aggregate principal amount of then
outstanding Total Funded Indebtedness of the Companies (net of cash) shall be
either (x) fixed rate Indebtedness or (y) Indebtedness subject to Interest Rate
Protection Agreements having terms and with counterparties reasonably
satisfactory to Joint Lead Arrangers or (z) any combination of (x) and (y)
above.
9.19. LIMITATION ON CERTAIN RESTRICTIONS AFFECTING SUBSIDIARIES. No
Company shall, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any direct or indirect encumbrance or restriction on
the ability of any Subsidiary to (a) pay dividends or make any other
distributions on such Subsidiary's Equity Interests or any other interest or
participation in its profits owned by any Company, or pay any Indebtedness or
any other obligation owed to any Company, (b) make Investments in or to any
Company, or (c) transfer any of its Property to any Company, except that each of
the following shall be permitted: (i) any such encumbrances or restrictions
existing on the Effective Date and described on SCHEDULE 9.19 or existing under
or by reason of (w) any Organic Document of any Qualified Joint Venture, (x) any
Requirement of Law, (y) the Credit Documents or (z) the Existing Indenture or
the Unsecured Note Documents and any Permitted Refinancing of any thereof so
long as such restriction in such or such Permitted Refinancing is not more
disadvantageous to the Creditors or Borrower than the Existing Indenture or the
Unsecured Note Documents (as the case may be), (ii) restrictions on the transfer
of Property subject to a Permitted Lien, (iii) customary restrictions on
subletting or assignment of any lease governing a leasehold interest of any
Company, and (iv) restrictions on the transfer of any Property subject to a
Disposition permitted under this Agreement.
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9.20. ADDITIONAL OBLIGORS. Upon any Company creating or acquiring any
Subsidiary after the Effective Date, such Company shall (i) cause each such
Subsidiary that is a Wholly Owned Subsidiary (excluding each Excluded Entity and
each Receivables Co.) to execute and deliver all such agreements, guarantees,
documents and certificates (including a Joinder Agreement and any amendments to
the Credit Documents) as Administrative Agent or the Majority Lenders may
reasonably request and do such other acts and things as Administrative Agent or
the Majority Lenders may reasonably request in order to have such Subsidiary
become a Guarantor, (ii) promptly, (I) execute and deliver to Administrative
Agent such amendments to the Security Documents as Administrative Agent deems
necessary or advisable in order to grant to Administrative Agent, for the
benefit of the Creditors, a perfected first priority security interest in the
Equity Interests and debt securities of such new Subsidiary which are owned by
any Company and required to be pledged pursuant to the Security Agreement (it
being understood that no Company shall be required to pledge Equity Interests of
any Foreign Subsidiary other than Equity Interests which do not comprise more
than 65% of the voting Equity Interests of each "first tier" Foreign
Subsidiary), (II) deliver to Administrative Agent the certificates representing
such Equity Interests and debt securities, together with (A) in the case of such
Equity Interests, undated stock powers endorsed in blank, and (B) in the case of
such debt securities, endorsed in blank, in each case executed and delivered by
a Responsible Officer of Borrower or such Subsidiary, as the case may be, (III)
cause such new Subsidiary (excluding each Excluded Entity and each Receivables
Co.) to take such actions necessary or advisable (including executing and
delivering a Joinder Agreement) to grant to Administrative Agent for the benefit
of the Creditors a perfected first priority security interest in the collateral
described in the Security Agreement with respect to such new Subsidiary,
including the filing of Uniform Commercial Code financing statements in such
jurisdictions as may be required by the Security Agreement or by law or as may
be reasonably requested by Administrative Agent, and (IV) deliver to
Administrative Agent all legal opinions reasonably requested relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to Administrative Agent.
9.21. LIMITATION ON PAYMENTS OR PREPAYMENTS OF INDEBTEDNESS OR
MODIFICATION OF DEBT DOCUMENTS. No Company shall, directly or indirectly:
(a) make any payment or prepayment (optional or otherwise) on, or
redemption of, or any payments in redemption, defeasance or repurchase
(whether in cash, securities or other Property) of, the Unsecured Notes,
any Existing Notes, any Subordinated Debt or any Permitted Refinancing of
any of the foregoing, EXCEPT (1) regularly scheduled mandatory payments of
interest and any reasonable consent solicitation fees and consent payments
(including in connection with a tender offer therefor) on the Existing
Notes made in connection with any consent solicitation (or tender offer and
consent solicitation) that eliminates or modifies negative covenants
thereunder permitted in Borrower's reasonable judgment by the Existing
Indenture to be eliminated or modified through a supplemental indenture
thereto, (2) pursuant to or in connection with the Note Tender or the Note
Defeasance, (3) the conversion or exchange of any Indebtedness into shares
of common Equity Interests of Borrower, (4) the exchange of Unsecured Notes
for Exchange Notes, (5) in connection with any Permitted Refinancing
(including by tender offer therefor with the proceeds of the new
Indebtedness) of any of the foregoing and (6) repurchases of Existing Notes
not tendered in the Note Tender for a
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purchase price not materially greater than that paid in the Note Tender up
to a maximum of $3.0 million;
(b) amend, supplement, waive or otherwise modify any of the material
provisions of any Unsecured Note Document or (other than in connection with
the Note Tender or the Note Defeasance) the Existing Indenture or the
Existing Notes (or any Permitted Refinancing of any thereof):
(i) which shortens the fixed maturity, or increases the rate or
shortens the time of payment of interest or dividends on, or increases
the amount or shortens the time of payment of any principal, or premium
payable whether at maturity, at a date fixed for prepayment or by
acceleration or otherwise of such Indebtedness, or increases the amount
of, or accelerates the time of payment of, any fees payable in
connection therewith;
(ii) which relates to the affirmative or negative covenants,
events of default, redemption or repurchase provisions, or remedies
under the documents or instruments evidencing such Indebtedness and the
effect of which is to subject any Obligor to any materially more
onerous or more restrictive provisions; or
(iii) if such Indebtedness is Subordinated Debt, which effects any
change to the subordination provisions (or related definitions) therein
or otherwise materially adversely affects the interests of the
Creditors as senior creditors or the interests of the Creditors under
any Credit Document in any respect; or
(c) in the event of the occurrence of a Change of Control, repurchase
any Unsecured Notes, Existing Notes, any Subordinated Debt or any Permitted
Refinancing of any thereof, unless Borrower shall have (i) made payment in
full of all Obligations and any other amounts then due and owing to each
Creditor hereunder and under any Note and cash collateralized the L/C
Liabilities on terms reasonably satisfactory to Administrative Agent or
(ii) made an offer to pay all Obligations and any amounts then due and
owing to each Creditor hereunder and under any Note and to cash
collateralize the L/C Liabilities in respect of each Lender and shall have
made payment in full thereof to each such Lender or Administrative Agent
which has accepted such offer and cash collateralized the L/C Liabilities
in respect of each such Lender which has accepted such offer; or
(d) effect any material change in any Unsecured Notes Indenture in
connection with an Exchange Offer or enter into an Exchange Indenture which
is different in any material respect from any Unsecured Notes Indenture in
connection with an Exchange Offer in each case unless the terms thereof are
reasonably acceptable to Agents and the Majority Lenders.
9.22. YEAR 2000 COMPLIANCE. Each Company will, on or prior to September
30, 1999, eliminate any significant risks that computer hardware, software or
any equipment containing embedded microchips used in their business or
operations will not in the case of dates or time periods occurring after
December 31, 1999 function, in the receipt, transmission, processing,
manipulation,
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storage, retrieval, retransmission or other utilization of data, at least as
effectively as in the case of dates or time periods occurring prior to January
1, 2000, in any respect that would cause a Material Adverse Effect.
Section 10. EVENTS OF DEFAULT. If one or more of the following events
(herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) (i) Borrower shall default in the payment when due (whether at
stated maturity upon prepayment or repayment or acceleration or otherwise)
of any principal of any Loan or Reimbursement Obligation, or (ii) Borrower
shall default in the payment when due of interest on any Loan or any
Reimbursement Obligation or any fee or any other amount payable by it
hereunder or under any other Credit Document when due and such default
under this clause (ii) shall have continued unremedied for three or more
Business Days; or
(b) (i) Any Company shall default in the payment when due of any
principal of or interest on any of its Indebtedness (other than the Loans)
aggregating $15.0 million or more, beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created, after giving effect to any consents or waivers relating thereto
obtained before the expiration of any such period of grace; or (ii) any
Company fails to perform or observe any other term, condition or covenant,
or any other event shall occur or condition exist under any note,
agreement, indenture or other document evidencing or relating to any
Indebtedness aggregating $15.0 million or more if the effect of such event
(after giving effect to any consents or waivers relating thereto obtained
before the expiration of any such period of grace) is to cause, or to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause (with or without notice or
passage of time or both), such Indebtedness to become due, or to be prepaid
in full (whether by redemption, purchase, offer to purchase or otherwise),
prior to its stated maturity; or
(c) Any representation or warranty made or deemed made in any Credit
Document (or in any modification or supplement thereto) by any Company or
in any certificate furnished to any Creditor pursuant to the provisions
thereof, shall prove to have been incorrect, false or misleading as of the
time made, deemed made or furnished in any material respect; or
(d) Any Obligor shall default in the performance of any of its material
obligations under any of Sections 9.01(f), 9.06 through 9.11, 9.15 or 9.17
through 9.19, 9.21 through 9.22; or Borrower shall default in the
performance of its obligations under Section 9.01(e) or (k) and such
default shall continue unremedied for at least five Business Days; or any
Obligor shall default in the performance of any of its other obligations in
this Agreement, the Security Documents or the L/C Documents and such
default shall continue unremedied for a period of at least thirty days
after written notice thereof to Borrower by Administrative Agent or the
Majority Lenders; or
(e) Any Company shall not, or shall admit in writing its inability to,
or be generally unable to, pay its debts as such debts become due (after
taking into account any applicable grace period); or
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(f) Any Company shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its Property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
or consents to any Insolvency Proceeding, (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of debts, (v)
fail to controvert within 60 days or in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
Insolvency Proceeding, or (vi) take any corporate action for the purpose of
effecting any of the foregoing; or
(g) (i) Any Insolvency Proceeding is commenced or filed against any
Company, or any writ, judgment, warrant of attachment, execution or similar
process is issued or levied against any Company, and either (1) such
proceeding or petition shall not be dismissed, or such writ, judgment,
warrant of attachment, execution or similar process shall not be released,
vacated or fully bonded, within 60 days after commencement, filing or levy
or (2) such proceeding shall not be actively contested by such Company;
(ii) any Company admits the material allegations of a petition against it
in any Insolvency Proceeding, or an order for relief (or similar order
under non-U.S. law) is ordered in any Insolvency Proceeding; (iii) any
Company acquiesces in the appointment of a receiver, receiver and manager,
trustee, custodian, conservator, liquidator, mortgagee in possession (or
agent therefor), or other similar person for itself or a substantial
portion of its Property or business; or (iv) an order of relief against any
Company shall be entered in any Insolvency Proceeding; or
(h) A final judgment or judgments for the payment of money in excess of
$15.0 million in the aggregate (exclusive of judgment amounts to the extent
covered by insurance or indemnity payments) shall be rendered by one or
more courts, administrative tribunals or other bodies having jurisdiction
against any Company and the same shall not be discharged (or provision
which results in a stay of execution shall not be made for such discharge),
vacated or bonded pending appeal, or a stay of execution thereof shall not
be procured, within 60 days from the date of entry thereof and such Company
shall not, within said period of 60 days, or such longer period during
which execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or
(i) An ERISA Event or noncompliance with respect to Foreign Plans shall
have occurred that when taken together with all other ERISA Events and
noncompliance with respect to Foreign Plans that have occurred, is
reasonably likely to result in liability of any Company in an aggregate
amount exceeding $20.0 million; or
(j) Any Change of Control shall occur; or
(k) Any Security Document after delivery thereof by any Obligor at any
time shall cease to be in full force and effect, or ceases (other than
pursuant to the terms hereof and thereof) to give Administrative Agent the
Liens, rights, powers and privileges purported to be created thereby, in
favor of Administrative Agent on behalf of the Creditors, superior to and
prior to the rights of all third Persons other than the holders of Prior
Liens and subject to no
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other Liens except as expressly permitted by the applicable Security
Document, or any judgment creditor having a Lien against any Collateral
commences legal action to foreclose such Lien or otherwise exercise its
remedies against any Collateral or any Company fails to comply with or to
perform any material obligation or agreement under any Security Document
within ten days after being requested by Administrative Agent or any
Lender; or
(l) Any Guarantee ceases to be in full force and effect (other than in
connection with the release thereof authorized by Section 9.06) or any of
the Guarantors repudiates, or attempts to repudiate, any of its obligation
under any of the Guarantees; or
(m) Any Credit Document or any material provision thereof shall at any
time and for any reason be declared by a court of competent jurisdiction to
be null and void, or a Proceeding shall be commenced by any Company or any
other Person, or by any Governmental Authority, seeking to establish the
invalidity or unenforceability thereof (exclusive of questions of
interpretation of any provision thereof), or any Company shall repudiate or
deny in writing that it has any liability or obligation for the payment of
principal or interest or other obligations purported to be created under
any Credit Document; or
(n) Any non-monetary judgment, order or decree is entered against any
Company which does or would reasonably be likely to have a Material Adverse
Effect, and there shall be any period of 45 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(o) The SBCL Acquisition shall not be consummated in all material
respects in accordance with this Agreement and the SBCL Acquisition
Agreement substantially concurrently with the making of the initial
extensions of credit hereunder or the SBCL Acquisition shall be unwound,
reversed or otherwise rescinded in whole or in any material part for any
reason; or
(p) The subordinated provisions relating to any Subordinated Debt (the
"SUBORDINATION PROVISIONS") shall fail in any material respect to be
enforceable by the Lenders (which have not effectively waived the benefits
thereof) in accordance with the terms thereof, or any Obligation shall fail
to constitute Senior Indebtedness (as defined in any Subordinated Debt), or
any Obligor shall, directly or indirectly, disavow or contest in any manner
any of the Subordination Provisions; or
(q) Any event or circumstance shall occur which permits or requires the
Persons purchasing, or financing the purchase of, Accounts under a
Permitted Receivables Transaction to stop so purchasing or financing such
Accounts, other than by reason of the occurrence of the stated expiry date
of such Permitted Receivables Transaction or the voluntary termination
thereof by Borrower; PROVIDED that any notices or cure periods that are
conditions to the rights of such Persons to stop purchasing, or financing
the purchase of, such Accounts have been given or have expired, as the case
may be; or
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(r) Any Obligor shall default in payment on any Swap Contracts if such
defaults in payment shall be in excess of $15.0 million in the aggregate;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (e), (f) or (g) of this Section 10 with respect to Borrower,
Administrative Agent may, and upon written direction of the Majority Lenders
shall, by notice to Borrower, terminate the Commitments and/or declare the
principal amount then outstanding of, and the accrued interest on, the Loans,
the Reimbursement Obligations and all other amounts payable by Borrower
hereunder and under the Notes (including any amounts payable under Section 5.05
or 5.06) to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by Borrower,
reduce any claim to judgment, take any other action permitted by law and/or take
any action permitted to be taken by the Security Documents during the existence
of an Event of Default; and (2) in the case of the occurrence of an Event of
Default referred to in clause (e), (f) or (g) of this Section 10 with respect to
Borrower, the Commitments shall automatically be terminated and the principal
amount then outstanding of, and the accrued interest on, the Loans, the
Reimbursement Obligations and all other amounts payable by Borrower hereunder
and under the Notes (including any amounts payable under Section 5.05 or 5.06)
shall automatically become immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by each Obligor.
In addition, Borrower agrees, upon the occurrence and during the
continuance of any Event of Default if Administrative Agent has declared the
principal amount then outstanding of, and accrued interest on, the Revolving
Loans, and all other amounts payable to the Revolving Lenders hereunder and
under the Notes evidencing such Loans to be due and payable, it may and shall,
if requested by the Majority Revolving Lenders through Administrative Agent
(and, in the case of any Event of Default referred to in clause (e), (f) or (g)
of this Section 10 with respect to Borrower, forthwith, without any demand or
the taking of any other action by Administrative Agent or such Lenders) provide
cover for the L/C Liabilities by paying to Administrative Agent immediately
available funds in an amount equal to the then aggregate undrawn face amount of
all Letters of Credit, which funds shall be held by Administrative Agent in the
Collateral Account as collateral security in the first instance for the L/C
Liabilities and be subject to withdrawal only as provided in the Security
Agreement.
Section 11. AGENTS.
11.01. GENERAL PROVISIONS. Each of the Lenders, Agents and L/C Lender
hereby irrevocably appoints Administrative Agent as its agent and authorizes
Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to Administrative Agent by the terms hereof and the
Security Documents, together with such actions and powers as are reasonably
incidental thereto. Administrative Agent agrees to give promptly to each Lender
a copy of each notice or other document received by it pursuant to any Credit
Document (other than any that are required to be delivered to the Lenders by any
Obligor).
The Lender or other financial institution serving as any Agent or L/C
Lender hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and
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may exercise the same as though it were not such Agent or L/C Lender, and such
bank and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with any Company or other Affiliate thereof as if
it were not such Agent or L/C Lender hereunder.
No Agent or L/C Lender shall have any duties or obligations except
those expressly set forth herein. Without limiting the generality of the
foregoing, (a) no Agent or L/C Lender shall be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) no Agent or L/C Lender shall have any duty to take any discretionary action
or exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby that such Agent or L/C Lender is required to
exercise in writing by the Majority Lenders (or such other number or percentage
of the Lenders as shall be required by Section 12.04), and (c) except as
expressly set forth herein, no Agent or L/C Lender shall have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to any Company that is communicated to or obtained by the financial
institution serving as such Agent or L/C Lender or any of its Affiliates in any
capacity. No Agent or L/C Lender shall be liable for any action taken or not
taken by it with the consent or at the request of the Majority Lenders (or such
other number or percentage of the Lenders as shall be required by Section 12.04)
or in the absence of its own gross negligence or willful misconduct. No Agent
shall be deemed to have knowledge of any Default unless and until written notice
thereof is given to Administrative Agent and such Agent by Borrower or a Lender,
and no Agent or L/C Lender shall be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with any Credit Document, (ii) the contents of any certificate,
report or other document delivered under any Credit Document or in connection
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth in any Credit Document, (iv)
the validity, enforceability, effectiveness or genuineness of any Credit
Document or any other agreement, instrument or document, (v) the satisfaction of
any condition set forth in Section 7 or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to such Agent or (vi) making
a determination that any condition precedent set forth in Section 7 that is to
be to such Agent's satisfaction is satisfied.
Each Agent and L/C Lender shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent and L/C Lender
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. Each Agent and L/C Lender may consult with legal counsel (who
may be counsel for Borrower), independent accountants and other experts selected
by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts. Each
Agent and L/C Lender may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with such Agent or L/C Lender. Each Agent
and L/C Lender shall be fully justified in failing or refusing to take any
action under any Credit Document unless it shall first receive such advice or
concurrence of the Majority Lenders (or, if so specified by this Agreement, all
Lenders or such other number or percentage of the Lenders as shall be required
by Section 12.04) as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action
(it being understood that this
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provision shall not release Administrative Agent from performing any action with
respect to Borrower expressly required to be performed by it pursuant to the
terms hereof) under this Agreement. Each Agent and L/C Lender shall in all cases
be fully protected in acting, or in refraining from acting, under the Credit
Documents in accordance with a request of the Majority Lenders (or, if so
specified by this Agreement, all Lenders), and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
Each Agent and L/C Lender may perform any and all of its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by such Agent or L/C Lender and reasonably acceptable to Borrower.
Each Agent, L/C Lender and any such sub-agent may perform any and all of its
duties and exercise its rights and powers through their respective Affiliates,
directors, officers, employees, agents and advisors ("RELATED PARTIES"). The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Related Parties of each Agent and L/C Lender and any such
sub-agent, and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
of such Agent or L/C Lender.
Subject to the appointment and acceptance of a successor Agent as
provided in this paragraph, any Agent may resign at any time by notifying the
Lenders, L/C Lender (with respect to Administrative Agent only) and Borrower.
Upon any such resignation, the Majority Lenders shall have the right to appoint
a successor which, so long as no Event of Default is continuing, shall be
reasonably acceptable to Borrower. If no successor shall have been so appointed
by the Majority Lenders and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of its resignation, then the retiring
Agent may, on behalf of the Lenders and L/C Lender, appoint a successor Agent
which shall be a bank with an office in New York, New York, or an Affiliate of
any such bank which, so long as no Event of Default is continuing, shall be
reasonably acceptable to Borrower. Upon the acceptance of its appointment as
Agent hereunder by a successor, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. The fees payable by Borrower to a successor Agent shall be the same
as those payable to its predecessor unless otherwise agreed between Borrower and
such successor. After Agent's resignation hereunder, the provisions of this
Section 11 shall continue in effect for the benefit of such retiring Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as such Agent.
Each Lender acknowledges that it has, independently and without
reliance upon any Agent, L/C Lender or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon any Agent,
L/C Lender or any other Lender and based on such documents and information as it
shall from time to time deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, any related
agreement or any document furnished hereunder or thereunder. No Agent or L/C
Lender shall be deemed a trustee or other fiduciary on behalf of any party.
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11.02. INDEMNIFICATION. Each Lender agrees to indemnify and hold
harmless each Agent and L/C Lender (to the extent not reimbursed under Section
12.03, but without limiting the obligations of any Obligor under Section 12.03),
ratably in accordance with the aggregate principal amount of the respective
Commitments of and/or Loans and Reimbursement Obligations held by the Lenders
(or, if all of the Commitments shall have been terminated or expired, ratably in
accordance with the aggregate outstanding amount of the Loans and Reimbursement
Obligations held by the Lenders), for any and all liabilities (including
pursuant to any Environmental Law), obligations, losses, damages, penalties,
actions, judgments, deficiencies, suits, costs, expenses (including reasonable
attorney's fees) or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against such Agent or L/C Lender (including
by any Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of any Credit Document or any other documents
contemplated by or referred to therein for any action taken or omitted to be
taken by such Agent or L/C Lender under or in respect of any Credit Document or
other such documents or the transactions contemplated thereby (including the
costs and expenses that the Obligors are obligated to pay under Section 12.03,
and including also any payments under any indemnity granted pursuant to Section
18 of the Security Agreement, or to any Financial Intermediary referred to in
Section 9 of the Security Agreement to which remittances in respect of
Receivables, as defined in the Security Agreement, are to be made but excluding,
unless a Default has occurred and is continuing, normal administrative costs and
expenses incident to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or of any such other
documents; PROVIDED, HOWEVER, that (1) no Lender shall be liable for any of the
foregoing to the extent resulting from the gross negligence, bad faith or
willful misconduct of the party to be indemnified and (2) no Lender shall be
liable for any of the foregoing to the extent resulting from the failure of any
other Lender to fund its participation in any Swing Loan or Letter of Credit.
The agreements set forth in this Section 11.02 shall survive the payment of all
Loans and other obligations hereunder and shall be in addition to and not in
lieu of any other indemnification agreements contained in any other Credit
Document.
11.03. CONSENTS UNDER OTHER CREDIT DOCUMENTS. Except as otherwise
provided in the Credit Documents, Administrative Agent may, with the prior
consent of the Majority Lenders (but not otherwise), consent to any
modification, supplement or waiver under any of the other Credit Documents.
11.04. COLLATERAL SUB-AGENTS. Each Lender by its execution and delivery
of this Agreement agrees, as contemplated by Section 9(g) of the Security
Agreement, that, in the event it shall hold any Cash Equivalents referred to
therein, upon the written request of Administrative Agent following the
occurrence of an Event of Default and the execution and delivery by
Administrative Agent, such Lender and the applicable Obligor of a mutually
acceptable control agreement with respect to such Cash Equivalents (it being
understood that no Lender is obligated to enter into any such control agreement)
such Cash Equivalents shall be held in the name and under the control of such
Lender, and such Lender shall hold such Cash Equivalents as a collateral
sub-agent for Administrative Agent thereunder. Each Obligor by its execution and
delivery of this Agreement hereby consents to the foregoing. In such event, such
Lender acting in the capacity of such a sub-agent shall be afforded all
protections set forth in Section 11 as if acting as Administrative Agent with
respect to such holdings. Notwithstanding anything in this Agreement or any
other Credit Document to the contrary, except, as set forth in Section 4.07
hereof, no Lender (other than Administrative Agent acting in such
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capacity) which is acting as a Financial Intermediary (as defined in the
Security Agreement) with respect to any Financial Account Collateral (as defined
in the Security Agreement) shall have any duty or obligation (whether express or
implied) to the other Lenders in respect of such Financial Account Collateral or
the disposition thereof unless such Lender, Administrative Agent and the
applicable Obligor have entered into a Financial Account Consent Agreement (as
defined in the Security Agreement) or other control or similar agreement with
respect to such Financial Account Collateral (it being understood that no Lender
shall have any obligation to enter into any such agreement).
Section 12. MISCELLANEOUS.
12.01. WAIVER. No failure on the part of any Creditor to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under any Credit Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
any Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
12.02. NOTICES. All notices, requests and other communications provided
for herein and under the Security Documents (including any modifications of, or
waivers, requests or consents under, this Agreement) shall be given or made in
writing (including by facsimile) delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof (or
any Guarantor, as so specified for Borrower) or, as to any party, at such other
address as shall be designated by such party in a notice to each other party.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by facsimile and confirmation of
receipt is received or personally delivered or, in the case of a mailed notice,
upon receipt, in each case given or addressed as aforesaid. Any Notice of
Borrowing or Notice of Continuation/Conversion shall be deemed to have been
received when actually received.
12.03. EXPENSES, INDEMNIFICATION, ETC. (a) The Obligors, jointly and
severally, agree to pay or reimburse:
(i) Agents for all reasonable out-of-pocket costs and expenses
(including the reasonable fees and expenses of Cahill Gordon & Reindel or
other counsel to Agents selected by Agents (and all local counsel deemed
reasonably necessary by Agents)) in connection with (1) the negotiation,
preparation, execution and delivery of the Credit Documents and the
extension and syndication of credit hereunder, (2) the negotiation or
preparation of any modification, supplement or waiver of any of the terms
of any Credit Document (whether or not consummated or effective) and (3)
the syndication of the Loans and Commitments;
(ii) each Creditor for all reasonable out-of-pocket costs and expenses
of such Creditor (including the reasonable fees and expenses of legal
counsel, including the cost of internal counsel) in connection with (1) any
enforcement or collection proceedings resulting from any Default, including
all manner of participation in or other involvement with (x) bankruptcy,
insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or
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proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated), (2) the enforcement of this Section
12.03 and (3) any documentary taxes; and
(iii) Administrative Agent for all reasonable costs, expenses, taxes,
assessments and other charges (including reasonable fees and disbursements
of counsel) incurred in connection with any filing, registration, recording
or perfection of any security interest contemplated by any Credit Document
or any other document referred to therein.
(b) The Obligors, jointly and severally, hereby agree to indemnify each
Creditor and their respective Affiliates, directors, trustees, officers,
employees and agents (each, an "INDEMNITEE") from, and hold each of them
harmless against, and that no Indemnitee will have any liability for, any and
all Losses incurred by any of them (including any and all Losses incurred by any
Agent or L/C Lender to any Lender, whether or not any Creditor is a party
thereto) directly or indirectly arising out of or by reason of or relating to
the negotiation, execution, delivery, performance, administration or enforcement
of any Credit Document, any of the transactions contemplated by the Credit
Documents (including the Transactions), any breach by any Company, as
applicable, of any representation, warranty, covenant or other agreement
contained in any Credit Document in connection with any of the Transactions, the
use or proposed use of any of the Loans or Letters of Credit, the issuance of or
performance under any Letter of Credit or the use of any collateral security for
the Loans (including the exercise by any Creditor of the rights and remedies or
any power of attorney with respect thereto and any action or inaction in respect
thereof), including all amounts payable by any Lender pursuant to Section 11.02,
but excluding any such Losses to the extent arising from the gross negligence,
bad faith or willful misconduct of the Indemnitee.
Without limiting the generality of the foregoing, the Obligors, jointly
and severally, will indemnify each Creditor and each other Indemnitee from, and
hold each Creditor and each other Indemnitee harmless against, any Losses
described in the preceding sentence arising under any Environmental Law as a
result of (A) the past, present or future operations of any Company (or any
predecessor in interest to any Company), (B) the past, present or future
condition of any site or facility owned, operated, leased or used at any time by
any Company (or any such predecessor in interest), or (C) any Release or
threatened Release of any Hazardous Materials at, on, under or from any such
site or facility (x) owned or operated by any Company (or any predecessor in
interest to any Company) or (y) at which any Company (or any such predecessor in
interest) is subject to liability under any Environmental Law, including any
such Release or threatened Release that shall occur during any period when any
Creditor shall be in possession of any such site or facility following the
exercise by such Creditor of any of its rights and remedies hereunder or under
any of the Security Documents; PROVIDED, HOWEVER, that the indemnity hereunder
shall be subject to the exclusions from indemnification set forth in the
preceding sentence.
To the extent that the undertaking to indemnify and hold harmless set
forth in this Section 12.03 or any other provision of any Credit Document
providing for indemnification is unenforceable because it is violative of any
law or public policy or otherwise, the Obligors, jointly and severally, shall
contribute the maximum portion that each of them is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all indemnified
liabilities incurred by any of the Persons indemnified hereunder.
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The Obligors also agree that no Indemnitee shall have any liability
(whether direct or indirect, in contract or tort or otherwise) for any Losses to
any Obligor or any Obligor's security holders or creditors resulting from,
arising out of, in any way related to or by reason of any matter referred to in
any indemnification or expense reimbursement provisions set forth in any Credit
Document, except to the extent that any Loss is determined by a court of
competent jurisdiction in a final nonappealable judgment to have resulted from
the gross negligence, bad faith or willful misconduct of such Indemnitee.
The Obligors agree that, without the prior written consent of
Administrative Agent, Syndication Agent and the Majority Lenders which consent
shall not be unreasonably withheld, no Obligor will settle, compromise or
consent to the entry of any judgment in any pending or threatened Proceeding in
respect of which indemnification is reasonably likely to be sought under the
indemnification provisions of this Section 12.03 (whether or not any Indemnitee
is an actual or potential party to such Proceeding), unless such settlement,
compromise or consent includes an unconditional written release of each
Indemnitee from all liability arising out of such Proceeding and does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of any Indemnitee and does not involve any payment of money or
other value by any Indemnitee or any injunctive relief or factual findings or
stipulations binding on any Indemnitee.
Without prejudice to the survival of any other agreement of the
Obligors hereunder, the agreement and obligations of the Obligors contained in
this Section 12.03 shall survive the payment in full of the Loans and all other
amounts payable under this Agreement.
12.04. AMENDMENTS, ETC. (i) No provision of any Credit Document may be
amended, modified or supplemented except by an instrument in writing signed by
the Obligors party thereto and the Majority Lenders, or by the Obligors party
thereto and Administrative Agent acting with the written consent of the Majority
Lenders, and no provision of any Credit Document may be waived except by an
instrument in writing signed by the Obligors party thereto and the Majority
Lenders, or by the Obligors party thereto and Administrative Agent acting with
the written consent of the Majority Lenders; PROVIDED, HOWEVER, that:
(a) no amendment, modification, supplement or waiver shall, unless by
an instrument signed by each Lender or by Administrative Agent acting with
the written consent of each Lender (other than any Lender that is, at such
time, a Defaulting Lender) (with the consent of Lenders (including any
Lender that is, at such time, a Defaulting Lender) having Obligations
directly affected thereby in the case of clauses (I), (II) or (IV) (it
being understood that the consent of no other Lender or Agent is needed in
each such case)): (I) extend the scheduled final maturity of any Loan or
Note, or extend the expiration date of any Letter of Credit beyond the R/C
Termination Date, or reduce the rate of interest (other than any waiver of
any increase in the interest rate applicable to any of the Loans pursuant
to clause (b) of Section 3.02) or fees thereon, or extend the time of
payment of interest or fees thereon (other than in connection with the
extension of any scheduled payment hereunder otherwise permitted hereby),
or reduce the principal amount thereof, or make any change to the
definition of Applicable Margin or Applicable Revolving Credit Fee
Percentage (or SCHEDULE 1.01(a), (b) or (c)) or any defined term used
therein in the context of being used therein in each case if the
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effect thereof would be to reduce the rate of interest or any fee
applicable to any Loan or Commitment from that previously in effect (it
being understood that any increase in the rate of interest or fee
applicable to any Loan or Commitment only requires the consent of the
Majority Lenders), or, subject to Section 12.04(iv), make any change to the
last sentence of the first paragraph of Section 2.09, or reduce the
Reimbursement Obligation in respect of any Letter of Credit, (II) extend
the final maturity of any of the Commitments (or reinstate any Commitment
terminated pursuant to Section 10) or amend Section 2.04(a), (III) change
the currency in which any Obligation is payable, (IV) amend the terms of
this Section 12.04 or clause (iv) of Section 12.06(b), Section 4.07, 5 or
11.03, (V) reduce the percentages specified in the definition of the term
"Majority Lenders" or "Supermajority Lenders" or amend or waive any
provision of any Credit Document requiring the consent of all the Lenders
or reduce any other percentage of the Lenders required to make any
determinations or waive any rights hereunder or to modify any provision
hereof, (VI) release any Guarantor from its obligations under Section 6
(unless permitted by this Agreement), (VII) consent to the assignment or
transfer by any Obligor of any of its rights and obligations under any
Credit Document except in a transaction permitted by Section 9.06, (VIII)
release all or substantially all the Collateral or terminate the Lien under
any Credit Document in respect of all or substantially all the Collateral
(except as permitted by the Credit Documents) or agree to additional
obligations (other than the Obligations and any other extensions of credit
under this Agreement consented to by the Majority Lenders) being secured by
the Collateral, (IX) amend Section 12.03 or any other indemnification and
expense reimbursement provision set forth in any Credit Document in any
manner adverse to any Creditor or (X) provide for Interest Periods with a
longer period than the then longest available Interest Period;
(b) no such amendment or waiver shall increase the Commitments of any
Lender over the amount thereof then in effect without the consent of such
Lender (it being understood that amendments or waivers of conditions
precedent, covenants or Defaults shall not constitute an increase of the
Commitment of any Lender);
(c) any modification or supplement of or waiver with respect to Section
11 which affects any Agent in its capacity as such shall require the
consent of such Agent;
(d) no consent of any Lender need be obtained, and Administrative Agent
is hereby authorized, to release any Lien securing the Obligations on
Property which is the subject of any disposition permitted by the Credit
Documents and to release any Guarantee of a Subsidiary upon the sale of all
of the Equity Interests of such Subsidiary in accordance with the Credit
Documents;
(e) subject to clause (a)(I) above of this proviso to this Section
12.04(i), the consent of all of the Lenders of the affected Term Facility
(but no other Lender or Agent) shall be required with respect to any
extension of any scheduled Amortization Payment or any reduction in the
amount of any scheduled Amortization Payment (except in accordance with
Section 2.09 or Section 2.10);
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(f) no modification, supplement or waiver shall, unless by an
instrument signed by the Supermajority Lenders of the Affected Class or by
Administrative Agent acting with the written consent of the Supermajority
Lenders of the Affected Class (it being understood that the consent of no
other Lender or Agent is needed), change the timing of the receipt or the
application of prepayments required by Section 2.10 among the Loans under
the several Term Facilities or the order in which any such prepayment is
applied to the Loans under any Term Facility;
(g) no reduction of the percentage specified in the definition of
"Majority Revolving Lenders," shall be made without the consent of each
Revolving Lender (other than any Lender that is, at such time, a Defaulting
Lender) (it being understood, that no consent of any other Lender or Agent
is needed);
(h) no reduction of the percentage specified in the definition of
"Supermajority Lenders of the Affected Class" shall be made without the
consent of each Term Loan Lender (it being understood, that no consent of
any other Lender or Agent is needed);
(i) no amendment or waiver shall affect the rights or duties of L/C
Lender in its capacity as such or alter the obligation of any Revolving
Lender pursuant to Section 2.03(e) or 2.03(f) without the consent of L/C
Lender;
(j) no consent of any Lender need be obtained to effect any amendment
of any Credit Document necessary to comply with Section 9.12 or Section
9.20;
(k) subject to Section 12.04(iv), no amendment or waiver of the second
paragraph of Section 2.09 or the second sentence of Section 2.10(b)(i) may
be made without the consent of the Lenders having at least 66 2/3% of the
Commitments or Loans of the Term B Facility or Term C Facility affected
thereby;
(l) no amendment, modification, supplement or waiver may be made to any
condition precedent to any extension of credit under the Revolving Facility
set forth in subsection 7.03 without the written consent of the Majority
Revolving Lenders, it being understood that no amendment to or waiver of
any representation or warranty or any covenant contained in any Credit
Document, or of any Default, shall be deemed to be effective for purposes
of determining whether the conditions precedent set forth in subsection
7.03 to the making of any extension of credit under the Revolving Loans
have been satisfied unless the Majority Revolving Lenders shall have
consented to such amendment or waiver;
(m) so long as any Term A Facility Loans, Revolving Loans, Swing Loans
or L/C Liabilities are outstanding or any Revolving Commitments are in
effect, the date then in effect for any scheduled Amortization Payment of
the Term B Facility Loans or the Term C Facility Loans may not be made
earlier than the date then in effect and the then applicable amount of any
such Amortization Payment (other than the last Amortization Payment
thereon) may not be increased without the consent of the Lenders holding a
majority of the sum of the Revolving Loans, L/C Liabilities, Unutilized
Revolving Commitments then in effect, Swing Loans
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and Term A Facility Loans (such Lenders holding such credit exposure, the
"MAJORITY PRO RATA LENDERS") then outstanding;
(n) so long as any Term A Facility Loans, Revolving Loans, Swing Loans
or L/C Liabilities are outstanding or any Revolving Commitments are in
effect or any Term B Facility Loans are outstanding, the date then in
effect for any scheduled Amortization Payment of the Term C Facility Loans
may not be made earlier than the date then in effect and the then
applicable amount of any such Amortization Payment (other than the last
Amortization Payment thereon) may not be increased without the consent of
the Majority Pro Rata Lenders (if any such extension of credit under the
Revolving Facility or Term A Facility Loans are outstanding or any
Revolving Commitments are in effect) and the consent of the Lenders holding
a majority of the Term B Facility Loans then outstanding;
(o) no amendments or waiver shall make any change to Section 2.01(g) or
the definitions of "Swing Loan Commitment," "R/C Termination Date" or
"Swing Loans" or the "Swing Loan Notes" without the consent of the Swing
Loan Lender; and
(p) no change shall be made to Section 2.10(b) that provides for the
Revolving Loans being repaid (or L/C Obligations being cash collateralized)
or Revolving Commitments being reduced prior to the time that no Term Loans
are outstanding with the Net Available Proceeds of any transaction or event
that pursuant to Section 2.10(a)(i) or Section 2.10(a)(iv) would otherwise
require prepayment of Term Loans without the consent of the Lenders holding
at least a majority of the sum of the aggregate amount of the Term B
Facility Loans and Term C Facility Loans (such Lenders of the Term B
Facility Loans and Term C Facility Loans voting together as one class) then
outstanding (it being understood that the consent of no other Lender or
Agent need be obtained).
(ii) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
Section 12.04(i)(a) (other than clause (I) of such section), the consent of the
Majority Lenders is obtained but the consent of one or more of such other
Lenders whose consent is required is not obtained, then Borrower shall have the
right to replace one or more of such non-consenting Lender or Lenders (so long
as all non-consenting Lenders are so replaced) with one or more Replacement
Lenders pursuant to Section 2.11 so long as at the time of such replacement each
such Replacement Lender consents to the proposed change, waiver, discharge or
termination; PROVIDED, HOWEVER, that Borrower shall not have the right to
replace a Lender solely as a result of the exercise of such Lender's rights (and
the withholding of any required consent by such Lender) pursuant to clause (I)
of Section 12.04(i)(a).
(iii) Notwithstanding anything herein to the contrary, (A) with the
consent of the Majority Lenders, other additional extensions of credit pursuant
to this Agreement may be included in the determination of the Majority Lenders,
Supermajority Lenders, Majority Revolving Lenders and Supermajority Lenders of
the Affected Class without notice to or consent of any other Lender or Agent on
substantially the same basis as the Commitments (and related extensions of
credit) are included on the Effective Date, and (B) it is agreed and understood
that, subject to clause (f) of Section
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12.04(i), any prepayment required by Section 2.10 (and any corresponding
reduction of the Revolving Commitments) may be modified, supplemented or waived
by the Majority Lenders.
(iv) Notwithstanding anything herein to the contrary, upon any
additional extensions of credit under this Agreement being approved by the
written consent of the Majority Lenders, Joint Lead Arrangers, Administrative
Agent and the Obligors are hereby authorized to effect amendments (without
notice to or the consent of any other Lender or Agent) to (i) Sections 1.01 and
1.03 for the purpose of including such appropriate defined terms as may be
necessary and apply to such additional extensions of credit being incorporated
into this Agreement to identify it as a separate Class of Loans (and within the
definition of "Commitments", "Loans", etc.) hereunder (if necessary), and to
include it in the various defined terms relating to required percentages of
outstanding extensions of credit hereunder for purposes of amendments and
waivers to the Credit Documents (e.g., "Majority Lenders", "Supermajority
Lenders") so long as treated on substantially the same terms as other Classes of
Loans are then treated (or with respect to "Supermajority Lenders of the
Affected Class", the Term Facilities); (ii) Section 2.08 to effect conforming
changes to reflect such new Class; (iii) Section 2.09 to treat any such new
Class that is a term extension of credit on substantially the same terms as the
Term Facilities are then treated (including, for any new Class held by lenders
similar to the Lenders of the Term B Facility or Term C Facility, the provisions
of the second paragraph of Section 2.09) (it being understood that the order of
application of optional prepayments to amortization payments for such new Class
shall be as agreed between the Obligors and the lenders extending such new
credit in their sole discretion) and to treat any such new Class that is a
revolving facility on substantially the same terms as the Revolving Facility is
then treated; (iv) Section 2.10(b) to treat any such new Class that is a term
extension of credit on substantially the same terms as the Term Facilities are
then treated (including, for any new Class held by lenders similar to the
Lenders of the Term B Facility or Term C Facility, the provisions of the last
sentence of Section 2.10(b)(i)) (it being understood that the order of
application of mandatory prepayments to amortization payments for such new Class
shall be as agreed between the Obligors and the lenders extending such new
credit in their sole discretion) and to treat any such new Class that is a
revolving facility on substantially the same terms as the Revolving Facility is
then treated; and (v) Section 3.01(b)(1) to provide for the amortization for
such new Class of Loans as provided for by the lenders thereof and the Obligors
in their sole discretion so long as approved by the Majority Lenders.
12.05. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
12.06. ASSIGNMENTS AND PARTICIPATIONS. (a) No Obligor may assign its
respective rights or obligations hereunder or under the Notes or any other
Credit Document without the prior written consent of all of the Lenders.
(b) Each Lender may assign (which may be non-PRO RATA among Loans and
Commitments) to any Eligible Person any of its Loans, its Notes, its L/C
Interests and its Commitments (but only with the consent (which shall not be
unreasonably withheld, delayed or conditioned) of Borrower, Joint Lead
Arrangers, Administrative Agent and, in the case of the Revolving Commitment,
L/C Lender); PROVIDED, HOWEVER, that (i) no such consent shall be required in
the case of any assignment to another Lender or any Lender's Affiliate or an
Approved Fund of any Lender (in which case,
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the assignee and assignor Lenders shall give notice of the assignment to
Borrower, Joint Lead Arrangers and Administrative Agent); (ii) no consent of
Borrower need be obtained if any Event of Default shall have occurred and be
continuing or if Joint Lead Arrangers, in consultation with Borrower, determine
that such assignment is necessary to achieve a successful syndication; (iii)
each assignment, other than to a Lender or any Lender's Affiliate or an Approved
Fund of any Lender and other than any assignment effected by either Joint Lead
Arranger or any of their respective Affiliates in connection with the
syndication of the Commitments and/or Loans or otherwise, shall not reduce the
assignor's aggregate Loans and Commitments to below $5.0 million (unless reduced
to $0 or unless Borrower and Joint Lead Arrangers otherwise consent) and shall
be in an aggregate amount of at least $1.0 million (unless the assignor's Loans
and Commitments are reduced to $0 or unless Borrower and Joint Lead Arrangers
otherwise consent); and (iv) in no event may any such assignment be made to any
Obligor or any of its Affiliates without consent of all Lenders. Any assignment
of a Loan shall be effective only upon appropriate entries with respect thereto
being made in the Register (and each Note shall expressly so provide). Any
assignment or transfer of a Loan shall be registered on the Register only upon
surrender for registration of assignment or transfer of the Note evidencing such
Loan (if a Note was issued in respect thereof), accompanied by an instrument in
writing substantially in the form of EXHIBIT F, and upon consent thereto by
Borrower, Joint Lead Arrangers and L/C Lender to the extent required above (none
of which consents to be unreasonably withheld, delayed, or conditioned), one or
more new Notes (if requested by the New Lender) in the same aggregate principal
amount shall be issued to the designated assignee (or its nominee) and the old
Notes shall be returned by Administrative Agent to Borrower marked "cancelled".
Upon execution and delivery by the assignee to Borrower, Joint Lead Arrangers
and the L/C Lender to the extent required above of an instrument in writing
substantially in the form of EXHIBIT F, and upon consent thereto by Borrower,
Joint Lead Arrangers and L/C Lender to the extent required above (none of which
consents to be unreasonably withheld, delayed, or conditioned), and in the case
of a Loan, upon appropriate entries being made in the Register the assignee
shall have, to the extent of such assignment (unless otherwise provided in such
assignment with the consent of Administrative Agent), the obligations, rights
and benefits of a Lender hereunder holding the Commitment(s), Loans (or portions
thereof) and L/C Interests assigned to it (in addition to the Commitment(s), L/C
Interests and Loans, if any, theretofore held by such assignee) and the
assigning Lender shall, to the extent of such assignment, be released from the
Commitment(s) (or portion(s) thereof) so assigned. Upon any such assignment
(other than to a Lender or any Affiliate of a Lender or any Approved Fund and
other than any assignment by either Joint Lead Arranger or any of their
respective Affiliates) the assignee Lender shall pay a fee of $3,500 to
Administrative Agent. Upon any such assignment, certain rights and obligations
of the assigning Lender shall survive as set forth in Section 12.07. Each
assignment shall be made pursuant to an agreement substantially in the form of
EXHIBIT L.
(c) A Lender may sell or agree to sell to one or more other Persons a
participation in all or any part of any Loans and L/C Interests held by it, or
in its Commitments, in which event each purchaser of a participation (a
"PARTICIPANT") shall be entitled to the rights and benefits of the provisions of
Section 5 (PROVIDED, HOWEVER, that no Participant shall be entitled to receive
any greater amount pursuant to Section 5 than the transferor Lender would have
been entitled to receive in respect of the participation effected by such
transferor Lender had no participation occurred) with respect to its
participation in such Loans, L/C Interests and Commitments as if such
Participant were a "Lender" for purposes of said Section, but, except as
otherwise provided in Section 4.07(c), shall not have any
<PAGE>
-126-
other rights or benefits under any Credit Document (the Participant's rights
against such Lender in respect of such participation to be those set forth in
the agreements executed by such Lender in favor of the Participant). All amounts
payable by Borrower to any Lender under Section 5 in respect of Loans, L/C
Interests and its Commitments shall be no greater than the amount that would
have applied if such Lender had not sold or agreed to sell any participation in
such Loans, L/C Interests and Commitments, and as if such Lender were funding
each of such Loan, L/C Interests and Commitments in the same way that it is
funding the portion of such Loan, L/C Interests and Commitments in which no
participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Credit Document, except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to any modification or amendment set forth in subclauses (I),
(II), (III) or (VIII) of clause (a) of the proviso to Section 12.04(i) to the
extent such Lender's consent is required therefor. Concurrently with the sale of
a participation, such Lender shall cause a participant to agree (for the benefit
of the Lender, Administrative Agent and the Obligor) that it will deliver the
tax forms and other forms required to be delivered pursuant to Section 5.06(b)
and comply from time to time with all applicable laws and regulations with
respect to withholding tax exemptions.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 12.06, any Lender may assign and pledge
all or any portion of its Loans and its Notes to any United States Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank and, in the case of a Lender that is a fund that
invests in bank loans, any such Lender may assign or pledge all or any portion
of its Loans and its Notes to any holders of obligations owed, or securities
issued, by such fund, as security for such obligations or securities, or to any
trustee for, or any other representative of, such holders, without notice to or
consent of Borrower, Administrative Agent, Joint Lead Arrangers or L/C Lender.
Any transfer as a result of the foreclosure on such pledge shall be subject to
Section 12.06(b). No such assignment shall release the assigning Lender from its
obligations hereunder.
(e) A Lender may furnish any information concerning any Company in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants) subject, however, to and so
long as the recipient agrees to be bound by the provisions of Section 12.11. In
addition, each Agent may furnish any information concerning any Obligor or any
of its Affiliates in such Agent's possession to any Affiliate of such Agent,
subject, however, to the provisions of Section 12.11. The Obligors shall assist
any Lender in effectuating any assignment pursuant to this Section 12.06
(including during syndication) in whatever manner such Lender reasonably deems
necessary, including participation in meetings with prospective transferees.
12.07. SURVIVAL. The obligations of the Obligors under Sections 5.01,
5.05, 5.06 and 12.03, the obligations of each Guarantor under Section 6.03, and
the obligations of the Lenders under Sections 5.06 and 11.02, shall survive the
repayment of the Loans and Reimbursement Obligations and the termination of the
Commitments and, in the case of any Lender that may assign any interest in its
Commitments, Loans or L/C Interest hereunder, shall (to the extent relating to
such time as it was a Lender) survive the making of such assignment,
notwithstanding that such assigning Lender may cease to be a "Lender" hereunder.
In addition, each representation and warranty made, or deemed to
<PAGE>
-127-
be made by a notice of any extension of credit, herein or pursuant hereto shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the Notes and the
making of any extension of credit hereunder, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that
Administrative Agent or any Lender may have had notice or knowledge of any
Default or incorrect representation or warranty and regardless of whether any
such representation or warranty under the SBCL Acquisition Agreement survives
the SBCL Acquisition.
12.08. CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
12.09. COUNTERPARTS; INTERPRETATION; EFFECTIVENESS. This Agreement may
be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the Fee
Letter and the Engagement Letter (as defined in the Commitment Letter)
constitute the entire contract among the parties thereto relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof, other than the Fee
Letter, the Engagement Letter and the indemnity, confidentiality, waiver of jury
trial and governing law provisions of the Commitment Letter and the provisions
of Section 2 of the Commitment Letter, which are not superseded and survive
solely as to the parties thereto. This Agreement shall become effective when the
Effective Date shall have occurred and this Agreement shall have been executed
and delivered by the Obligors and each Agent and when Administrative Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement. Upon the effectiveness of this
Agreement, all commitments to provide any financing pursuant to the Commitment
Letter shall permanently terminate.
12.10. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVERS; ETC. (a)
Each Credit Document shall be governed by, and construed in accordance with, the
law of the State of New York, without regard to the principles of conflicts of
laws thereof (except in the case of the other Credit Documents, to the extent
otherwise expressly stated therein). Each Obligor hereby irrevocably and
unconditionally: (I) submits for itself and its Property in any Proceeding
relating to any Credit Document to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the Supreme Court of the State of New York sitting in New York
County, the courts of the United States of America for the Southern District of
New York, and appellate courts from any thereof; (II) consents that any such
Proceeding may be brought in any such court; (III) agrees that service of
process in any such Proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to Borrower at its address set forth on the signature page
hereto or at such other address of which Administrative Agent shall have been
notified pursuant thereto; and (IV) agrees that nothing herein shall affect the
right to effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
<PAGE>
-128-
(b) EACH OBLIGOR, EACH AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
AND FOR ANY COUNTERCLAIM THEREIN.
12.11. CONFIDENTIALITY. Each Lender agrees to keep confidential
information obtained by it pursuant to the Credit Documents confidential in
accordance with such Lender's customary practices and agrees that it will only
use such information in connection with the transactions contemplated hereby and
not disclose any of such information other than (a) to such Lender's employees,
representatives, directors, attorneys, auditors, agents, professional advisors,
trustees or affiliates who are advised of the confidential nature thereof or to
any direct or indirect contractual counterparty in swap agreements or such
contractual counterparty's professional advisor (so long as such contractual
counterparty or professional advisor to such contractual counterparty agrees to
be bound by the provision of this Section 12.11, such Lender being liable for
any breach of confidentiality by any Person described in this clause (a) and
with respect to disclosures to an Affiliate to the extent disclosed by such
Lender to such Affiliate), (b) to the extent such information presently is or
hereafter becomes available to such Lender on a non-confidential basis from a
Person not an Affiliate of such Lender not known to such Lender to be violating
a confidentiality obligation by such disclosure, (c) to the extent disclosure is
required by any Law, subpoena or judicial order or process (PROVIDED that notice
of such requirement or order shall be promptly furnished to Borrower unless such
notice is legally prohibited) or requested or required by bank, securities,
insurance or investment company regulations or auditors or any administrative
body or commission (including the Securities Valuation Office of the NAIC) to
whose jurisdiction such Lender may be subject, (d) to any rating agency to the
extent required in connection with any rating to be assigned to such Lender, (e)
to assignees or participants or prospective assignees or participants who agree
to be bound by the provisions of this Section 12.11, (f) to the extent required
in connection with any litigation between any Obligor and any Creditor with
respect to the Loans or any Credit Document or (g) with Borrower's prior written
consent.
12.12. INDEPENDENCE OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants contained herein shall be independent
of each other and no exception to any representation, warranty or covenant shall
be deemed to be an exception to any other representation, warranty or covenant
contained herein unless expressly provided, nor shall any such exception be
deemed to permit any action or omission that would be in contravention of
applicable law.
12.13. SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.
[Signature Pages Follow]
<PAGE>
-1-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
QUEST DIAGNOSTICS INCORPORATED
By: /s/ Kenneth W. Freeman
--------------------------------------
Name: Kenneth W. Freeman
Title: Chief Executive Officer
Address for Notices:
One Malcolm Avenue
Teterboro, New Jersey 07608
Contact Person: Treasurer
Facsimile No.: (201) 462-4169
Telephone No.: (201) 393-5144
<PAGE>
-2-
GUARANTORS:
SBCL, Inc. (DE)
SmithKline Beecham Clinical
Laboratories, Inc. (DE)
Quest Diagnostics Incorporated (CA)
Quest Holdings Incorporated (MD)
Quest Diagnostics Incorporated (MD)
Quest Holdings Incorporated (MI)
Quest Diagnostics LLC (IL)
Quest Diagnostics Incorporated (MI)
Quest Diagnostics Incorporated (CT)
Quest Diagnostics Incorporated (MA)
Quest Diagnostics of Pennsylvania Inc.
(DE)
Quest Diagnostics Incorporated (OH)
MetWest Inc. (DE)
Nichols Institute Diagnostics (CA)
DPD Holdings, Inc. (DE)
Diagnostics Reference Services Inc. (MD)
Laboratory Holding Incorporated (MA)
Quest MRL Inc. (DE)
Each as a Guarantor and Pledgor
By: /s/ Kenneth W. Freeman
--------------------------------------
Name: Kenneth W. Freeman
Title: President
QUEST DIAGNOSTICS INVESTMENTS
INCORPORATED
QUEST DIAGNOSTICS FINANCE
INCORPORATED
Each as a Guarantor and Pledgor
By: /s/ Peter C. Fulweiler
--------------------------------------
Name: Peter C. Fulweiler
Title: President
<PAGE>
-3-
PATHOLOGY BUILDING PARTNERSHIP, by
Quest Diagnostics Incorporated (MD), as
General Partner
As a Guarantor and Pledgor
By: /s/ Kenneth W. Freeman
--------------------------------------
Name: Kenneth W. Freeman
Title: President
<PAGE>
-4-
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED,
as Joint Lead Arranger and Syndication
Agent
By:
--------------------------------------
Name:
Title:
Address for Notices:
Attention:
Facsimile No.:
Telephone No.:
<PAGE>
-5-
BANC OF AMERICA SECURITIES
LLC, as Joint Lead Arranger
By:
--------------------------------------
Name:
Title:
Address for Notices:
Bank of America Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255-0001
Mail Code: NC1-007-07-01
Attention: Lucine Kirchhoff
Facsimile No: (704) 388-0209
Telephone No: (704) 388-6001
<PAGE>
-6-
BANK OF AMERICA, N.A.,
as Administrative Agent
By:
--------------------------------------
Name:
Title:
Address for Notices:
One Independence Center
101 North Tryon Street - 15th Floor
Charlotte, North Carolina 28255
Mail Code: NCI-001-15-04
Attention: Mike Roof
Facsimile No.: (704) 409-0024
Telephone No.: (704) 388-3916
100 North Tryon Street
Charlotte, North Carolina 28255
Mail Code: NC1-007-17-11
Attention: Phil Durand
Facsimile No.: (704) 388-6002
Telephone No.: (704) 386-4955
<PAGE>
-7-
WACHOVIA BANK, N.A.,
as Co-Documentation Agent
By:
--------------------------------------
Name:
Title:
Address for Notices:
Facsimile No.:
Telephone No.:
<PAGE>
-8-
THE BANK OF NEW YORK,
as Co-Documentation Agent
By:
--------------------------------------
Name:
Title:
Address for Notices:
Facsimile No.:
Telephone No.:
<PAGE>
-9-
LENDERS
MERRILL LYNCH CAPITAL CORPORATION,
as a Lender
By:
--------------------------------------
Name:
Title:
Lending Office for all Loans:
Address for Notices:
Attention:
Facsimile No.:
Telephone No.:
<PAGE>
-10-
BANK OF AMERICA, N.A.,
as a Lender
By:
--------------------------------------
Name:
Title:
Lending Office for all Loans:
One Independence Center
101 North Tryon Street - 15th Floor
Charlotte, North Carolina 28255
Mail Code: NC1-001-15-04
Attention: Mike Roof
Facsimile No.: (704) 409-0024
Telephone No.: (704) 388-3916
Address for Notices:
One Independence Center
101 North Tryon Street - 15th Floor
Charlotte, North Carolina 28255
Mail Code: NC1-001-15-04
Attention: Mike Roof
Facsimile No.: (704) 409-0024
Telephone No.: (704) 388-3916
<PAGE>
-11-
WACHOVIA BANK, N.A.,
as a Lender
By:
--------------------------------------
Name:
Title:
Lending Office for all Loans:
Address for Notices:
<PAGE>
-12-
THE BANK OF NEW YORK,
as a Lender
By:
--------------------------------------
Name:
Title:
Lending Office for all Loans:
Address for Notices:
<PAGE>
-13-
By:
--------------------------------------
Name:
Title:
Lending Office for all Loans:
Attention:
Facsimile No.:
Telephone No.:
Address for Notices:
Attention:
Facsimile No.:
Telephone No.:
<PAGE>
Exhibit 12
SECURITY AGREEMENT
SECURITY AGREEMENT (the "AGREEMENT"), dated as of August 16,
1999 made by QUEST DIAGNOSTICS INCORPORATED, a Delaware corporation having an
office at One Malcolm Avenue, Teterboro, New Jersey 07608 ("BORROWER"), and EACH
OF THE GUARANTORS LISTED ON THE SIGNATURE PAGES HERETO OR FROM TIME TO TIME
PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (collectively, the
"GUARANTORS"), as pledgors, assignors and debtors (Borrower, together with the
Guarantors, in such capacities and together with any successors in such
capacities, the "PLEDGORS", and each, a "PLEDGOR"), in favor of BANK OF AMERICA,
N.A., having an office at 101 North Tryon Street, Charlotte, North Carolina
28255, in its capacity as administrative agent, as pledgee, assignee and secured
party (in such capacity and together with any successors in such capacity, the
"ADMINISTRATIVE AGENT") for the lending institutions (the "LENDERS") from time
to time party to the Credit Agreement (as hereinafter defined).
R E C I T A L S :
A. Pursuant to that certain credit agreement, dated as of
August , 1999 (as the same may be amended, amended and restated, supplemented,
or otherwise modified from time to time, the "CREDIT Agreement"; capitalized
terms used herein and not defined herein shall have the meanings assigned to
them in the Credit Agreement), among Borrower, the Guarantors, certain lenders,
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
joint lead arranger and syndication agent, NationsBanc Montgomery Securities
LLC, as joint lead arranger, Administrative Agent, The Bank of New York, as
documentation agent, and Wachovia Bank of Georgia, as documentation agent, the
Lenders have agreed (i) to make to or for the account of Borrower, Capital
Markets Facility Loans up to an aggregate principal amount of $300.0 million,
Term A Facility Loans up to an aggregate principal amount of $400.0 million,
Term B Facility Loans up to an aggregate principal amount of $325.0 million,
Term C Facility Loans up to an aggregate principal amount of $300.0 million and
Revolving Loans up to an aggregate principal amount of up to $250.0 million
(including up to $35.0 million of Swing Loans) and (ii) subject to certain terms
and conditions, to issue certain Letters of Credit for the account of Borrower.
B. It is contemplated that Borrower may enter into one or more
Swap Contracts (the "SECURED SWAP CONTRACTS") fixing the interest rates with
respect to Loans under the Credit Agreement (all obligations of Borrower now
existing or hereafter arising under such Swap Contracts entered into with any
Creditor satisfying the requirements of clause (d) of the definition of the term
"Creditor", collectively, the "SWAP OBLIGATIONS").
C. Each Guarantor has guaranteed the obligations of Borrower
under the Credit Agreement and the other Credit Documents, and each Guarantor
desires that its Guarantee be secured hereunder.
D. Each Pledgor is or will be the legal and/or beneficial
owner of the Pledged Collateral (as hereinafter defined) to be pledged by it
hereunder.
E. It is a condition to the obligations of the Lenders to make
certain of the Loans under the Credit Agreement and a condition to any Lender
issuing certain Letters of Credit under the Credit Agree-
<PAGE>
-2-
ment or entering into certain Swap Contracts that each Pledgor execute and
deliver the applicable Credit Documents, including this Agreement.
F. This Agreement is given by each Pledgor in favor of
Administrative Agent for its benefit and the benefit of the other Creditors
(each a "SECURED PARTY" and collectively, the "SECURED PARTIES") to secure the
payment and performance of all of the Secured Obligations (as defined in Section
2).
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing premises and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Pledgors and Administrative Agent hereby agree as
follows:
Section 1. PLEDGE. As collateral security for the payment and
performance when due of all the Secured Obligations, each Pledgor hereby
pledges, assigns and grants to Administrative Agent for its benefit and the
benefit of the other Secured Parties, a continuing security interest in and to
and pledge of all of the right, title and interest of such Pledgor in, to and
under the following property, wherever located, whether now existing or
hereafter arising or acquired from time to time (collectively, the "PLEDGED
COLLATERAL"):
(a) all "accounts", as such term is defined in the Uniform
Commercial Code as in effect from time to time in any applicable
jurisdiction (the "UCC"), and in any event including, without
limitation, all of such Pledgor's rights to any and all (i) accounts,
accounts receivable, margin accounts, futures positions, book debts,
instruments, documents, contracts, contract rights, choses in action,
notes, drafts, acceptances, chattel paper and other forms of
obligations and receivables now or hereafter owned or held by or
payable to such Pledgor relating in any way to or arising from the sale
or lease of goods or the rendering of services by such Pledgor or any
other party, including the right to payment of any interest or finance
charge with respect thereto, together with all merchandise represented
by any of the accounts, (ii) such merchandise that may be reclaimed or
repossessed or returned to such Pledgor, (iii) such Pledgor's rights as
an unpaid vendor, including stoppage in transit, reclamation, replevin
and sequestration, (iv) assets pledged, assigned, hypothecated or
granted to, and all letters of credit, guarantee claims, Liens, and
security interests held by, such Pledgor to secure payment of any
accounts and which are delivered for or on behalf of any account
debtor, (v) accessions to all of the foregoing described properties and
interests in properties, (vi) powers of attorney for the execution of
any evidence of indebtedness or security or other writing in connection
with the foregoing, (vii) evidences of the filing of financing
statements and other statements and the registration of other
instruments in connection therewith and amendments thereto, notices to
other creditors or secured parties and certificates from filing or
other registration offices, (viii) guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (ix) customer lists
and invoices and (x) general intangibles arising out of such Pledgor's
rights in any goods, the sale of which give rise to any of the
foregoing (collectively, the "RECEIVABLES");
(b) all "inventory", as such term is defined in the UCC, of
such Pledgor wherever located and of every class, kind and description
and, in any event including, without limitation, (i) all goods,
merchandise, raw materials, work-in-process, returned goods, finished
goods, samples and consigned goods (to the extent of the consignee's
interest therein), materials and supplies of any kind or nature which
are or might be used in connection with the manufacture, printing,
publication, packing, shipping, advertising, selling or finishing of
any such goods and all other products, goods, materials and
<PAGE>
-3-
supplies, (ii) all inventory as is temporarily out of such Pledgor's
custody or possession, items in transit and any returns and
repossessions upon any Receivables and (iii) all substitutions therefor
or replacements thereof, and all additions and accessions thereto
(collectively, the "INVENTORY");
(c) any and all sale, service, performance and equipment or
property lease contracts, agreements, licenses and grants (whether
written or oral, or third party or intercompany), and any other
document (whether written or oral) between such Pledgor and third
parties, and all assignments, amendments, restatements, supplements,
extensions, renewals, replacements or modifications thereof, including,
without limitation, the Acquisition Agreement (collectively, the
"CONTRACTS", and each, a "CONTRACT"); PROVIDED, HOWEVER, that Contracts
shall not include any contract, agreement, grant, or other document to
the extent that such Pledgor is expressly prohibited from granting a
Lien thereon or applicable Law provides for the involuntary forfeiture
thereof in the event that a Lien is granted thereon without the consent
of the appropriate Person or Governmental Authority (as hereinafter
defined); PROVIDED, FURTHER, that in the event of the termination or
elimination of any prohibition or requirement for any consent contained
in any law, rule, regulation, contract, agreement, grant or other
document, or upon the granting of any consent, the contract, agreement,
grant or other document so excluded from the definition of Contracts by
virtue of the immediately preceding PROVISO shall (without any act or
delivery by any Person) constitute a Contract hereunder;
(d) all "equipment", as such term is defined in the UCC, and,
in any event including, without limitation, all machinery, apparatus,
equipment, office machinery, electronic data-processing equipment,
computers and computer hardware and software (whether owned or
licensed, to the extent that a security interest therein may be granted
by such Pledgor), furniture, conveyors, tools, materials, storage and
handling equipment, automotive equipment, motor vehicles, tractors,
trailers and other like property, whether or not the title thereto is
governed by a certificate of title or ownership, and all other
equipment of every kind and nature owned by such Pledgor or in which
such Pledgor may have any interest (to the extent of such interest) and
all modifications, renewals, improvements, alterations, repairs,
substitutions, attachments, additions, accessions and other property
now or hereafter affixed thereto or used in connection therewith, all
replacements and all parts therefor and together with all substitutes
for any of the foregoing (collectively, the "EQUIPMENT");
(e) all "general intangibles", as such term is defined in the
UCC, and, in any event including, without limitation, (i) all of such
Pledgor's rights, title and interest in, to and under all Contracts;
(ii) all manuals, blueprints, know-how, warranties and records in
connection with the Equipment; (iii) any and all other rights, claims,
choses-in-action and causes of action of such Pledgor against any other
Person and the benefits of any and all collateral or other security
given by any other Person in connection therewith; (iv) all lists,
books, records, ledgers, print-outs, files (whether in printed form or
stored electronically), tapes and other papers or materials containing
information relating to any of the Pledged Collateral including,
without limitation, all customer lists, identification of suppliers,
data, plans, blueprints, specification designs, drawings, recorded
knowledge, surveys, engineering reports, test reports, manuals,
standards, processing standards, performance standards, catalogs,
research data, computer and automatic machinery software and programs
and the like pertaining to operations by such Pledgor or the Pledged
Collateral, field repair data, sales data and other information
relating to sales of products now or hereafter manufactured,
distributed or franchised by such Pledgor, accounting information
pertaining to such Pledgor's operations or any of the Pledged
Collateral and all media in which or on which any of the information or
knowledge or data or records relating to such operations or any of the
Pledged Collateral may be recorded or stored and all computer programs
used for the compila-
<PAGE>
-4-
tion or printout of such information, knowledge, records or data, (v)
all licenses, consents, permits, variances, certifications and
approvals of any federal, state, local, foreign or other governmental
or administrative (including self-regulatory) body, instrumentality,
department or agency or any court, tribunal, administrative hearing
body, arbitration panel, commission or other similar dispute-resolving
body including, without limitation, those governing the regulation and
protection of the environment (each, a "GOVERNMENTAL AUTHORITY") (or
any Person acting on behalf of a Governmental Authority) now or
hereafter held by such Pledgor pertaining to operations now or
hereafter conducted by such Pledgor or any Pledged Collateral now or
hereafter held by such Pledgor; PROVIDED, HOWEVER, that Intangibles
shall not include any of the foregoing to the extent that such Pledgor
is expressly prohibited from granting a Lien thereon or applicable Law
provides for the involuntary forfeiture thereof in the event that a
Lien is granted thereon without the consent of the appropriate Person
or Governmental Authority (as hereinafter defined); (vi) all rights to
refund or indemnification to the extent the foregoing relate to any
Pledged Collateral and income tax refunds to the extent relating to any
Pledged Collateral, claims for tax or other refunds against any city,
county or state or federal government, or any agency or authority or
other subdivision thereof relating to any Pledged Collateral, but
excluding any of the foregoing included in the definition of
Intellectual Property Collateral (as hereinafter defined)
(collectively, the "INTANGIBLES");
(f) all insurance policies held by such Pledgor or naming such
Pledgor as insured, additional insured or loss payee (including,
without limitation, casualty insurance, liability insurance, property
insurance and business interruption insurance), all such insurance
policies entered into after the date hereof other than insurance
policies (or certificates of insurance evidencing such insurance
policies) relating to health and welfare insurance and life insurance
policies in which such Pledgor is not named as beneficiary (I.E.,
insurance policies that are not "Key Man" insurance policies) and all
rights, claims and recoveries relating thereto (including all
dividends, returned premiums and other rights to receive money in
respect of any of the foregoing) (collectively, the "INSURANCE
POLICIES");
(g) such Pledgor's right to receive the surplus funds, if any,
which are payable to such Pledgor following the termination of any
employee pension plan and the satisfaction of all liabilities of
participants and beneficiaries under such plan in accordance with
applicable law (collectively, the "PENSION PLAN REVERSIONS");
(h) the issued and outstanding shares of capital stock or
other equity interest of each Person described in SCHEDULE I-A annexed
hereto and each other corporation or other entity hereafter acquired or
formed by such Pledgor [(which are and shall remain at all times until
this Agreement terminates, certificated shares)], including the
certificates representing the Pledged Shares and any interest of such
Pledgor in the entries on the books of any financial intermediary
pertaining to the Pledged Shares and all Additional Shares (as
hereinafter defined) (collectively, the "PLEDGED SHARES"); PROVIDED,
HOWEVER, that such Pledgor shall not be required to pledge shares
possessing more than 65% of the voting power of all classes of capital
stock entitled to vote of any Subsidiary which is a controlled foreign
corporation (as defined in SECTION 957(A) of the Internal Revenue Code
of 1986, as amended from time to time (the "TAX CODE")) and, in any
event, shall not be required to pledge the shares of stock of any
Subsidiary otherwise required to be pledged pursuant to this SUBSECTION
1(H) to the extent that such pledge would constitute an investment of
earnings in United States property under SECTION 956 (or a successor
provision) of the Tax Code, which investment would trigger an increase
in the gross income of a United States shareholder of such Pledgor
pursuant to SECTION 951 (or a successor provision) of the Tax Code;
PROVIDED, FURTHER, that if following a change in the relevant sections
of the Tax Code or the regulations,
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rules, rulings, notices or other official pronouncements issued or
promulgated thereunder which would permit a pledge of 66-2/3% or more
of the total combined voting power of all classes of capital stock of
any Foreign Subsidiary entitled to vote without causing the
undistributed earnings of such Foreign Subsidiary as determined for
United States Federal income taxes to be treated as a deemed dividend
to the Pledgors for United States Federal income tax purposes, then the
65% limitation set forth above shall no longer be applicable and the
Pledgors shall duly pledge and deliver to Administrative Agent such
maximum additional percentage of the capital stock not theretofore
required to be pledged hereunder as will not cause such a deemed
dividend to have been made;
(i) subject to the provisos set forth in clause (h) above, all
additional shares of capital stock of whatever class of any issuer of
the Pledged Shares from time to time acquired by such Pledgor in any
manner (which are and shall remain at all times until this Agreement
terminates, certificated shares), including the certificates
representing such additional shares and any interest of such Pledgor in
the entries on the books of any financial intermediary pertaining to
such additional shares (collectively, the "ADDITIONAL SHARES");
(j) all membership interests and/or partnership interests, as
applicable, of each Person described in SCHEDULE I-B annexed hereto
and, to the extent such partnership or limited liability company is not
a Qualified Joint Venture under Section 9.09(A)(k) of the Credit
Agreement, each other limited liability company or partnership
hereafter acquired or formed by such Pledgor, together with all rights,
privileges, authority and powers of such Pledgor in and to each such
Person or under the membership or partnership agreement of each such
Person (the "OPERATIVE AGREEMENTS"), and the certificates, instruments
and agreements, if any, representing such membership or partnership
interests (collectively, the "INITIAL PLEDGED INTERESTS");
(k) all options, warrants, rights, agreements, additional
membership or partnership interests or other interests relating to each
such Person described in clause (j) above or any interest in any such
Person, including, without limitation, any right relating to the equity
or membership or partnership interests in any such Person or under the
Operative Agreement of any such Person, from time to time acquired by
such Pledgor in any manner and the certificates, instruments and
agreements, if any, representing such additional interests
(collectively, the "ADDITIONAL INTERESTS"; together with the Initial
Pledged Interests, the "PLEDGED INTERESTS"; the Pledged Interests,
together with the Pledged Shares, the Additional Shares and the items
or types of Pledged Collateral described in SUBSECTION 1(N) of this
Agreement, collectively, the "PLEDGED SECURITIES");
(l) all intercompany debt described in SCHEDULE II annexed
hereto (and all other intercompany debt hereafter acquired by such
Pledgor) and all certificates or instruments evidencing such
intercompany debt and all proceeds thereof, all accessions thereto and
substitutions therefor (collectively, the "INTERCOMPANY DEBT");
(m) all dividends, cash, options, warrants, rights,
instruments, distributions, returns of capital or principal, income,
interest, profits and other property, interests (debt or equity) or
proceeds, including as a result of a split, revision, reclassification
or other like change of the Pledged Securities, from time to time
received, receivable or otherwise distributed to such Pledgor in
respect of or in exchange for any or all of the Pledged Securities or
Intercompany Debt (collectively, "DISTRIBUTIONS");
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(n) without affecting the obligations of such Pledgor under
any provision prohibiting such action hereunder or under the Credit
Agreement, in the event of any consolidation or merger in which any
Person listed in SCHEDULE I-A or SCHEDULE I-B annexed hereto is not the
surviving entity, all shares of each class of the capital stock of the
successor corporation or interests or certificates of the successor
limited liability company or partnership owned by such Pledgor (unless
such successor is such Pledgor itself) formed by or resulting from such
consolidation or merger;
(o) all patents issued or assigned to and all patent
applications and registrations made by such Pledgor, including, without
limitation, the patents, patent applications, registrations and
recordings listed in SCHEDULE III annexed hereto, together with any and
all (i) rights and privileges arising under applicable law with respect
to such Pledgor's use of any patents, (ii) inventions and improvements
described and claimed therein, (iii) reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof,
(iv) income, fees, royalties, damages, claims and payments now and
hereafter due and/or payable thereunder and with respect thereto,
including, without limitation, damages and payments for past, present
or future infringements thereof, (v) rights corresponding thereto
throughout the world, and (vi) rights to sue for past, present and
future infringements thereof (collectively, the "PATENTS");
(p) all trademarks (including service marks), logos, federal
and state trademark registrations, common law trademarks and trade
names owned by or assigned to such Pledgor and all registrations for
the foregoing, including, without limitation, the registrations listed
in SCHEDULE IV annexed hereto, together with any and all (i) rights and
privileges arising under applicable law with respect to such Pledgor's
use of any trademarks, (ii) reissues, continuations, extensions and
renewals thereof, (iii) income, fees, royalties, damages and payments
now and hereafter due and/or payable thereunder and with respect
thereto, including, without limitation, damages, claims and payments
for past, present or future infringements thereof, (iv) rights
corresponding thereto throughout the world and (v) rights to sue for
past, present and future infringements thereof (collectively, the
"Trademarks"), it being expressly understood that "Trademarks" shall
not include any federal trademark applications; PROVIDED, that in the
event of the termination or elimination of the provision of applicable
law prohibiting a Lien on trademark applications, all federal trademark
applications of such Pledgor shall constitute "Trademarks" hereunder
without any further act or delivery of any Person
(q) all copyrights (whether statutory or common law) owned by
or assigned to such Pledgor, together with any and all (i) rights and
privileges arising under applicable law with respect to such Pledgor's
use of any copyrights, (ii) reissues, renewals, continuations and
extensions thereof, (iii) income, fees, royalties, damages, claims and
payments now and hereafter due and/or payable with respect thereto,
including, without limitation, damages and payments for past, present
or future infringements thereof, (iv) rights corresponding thereto
throughout the world and (v) rights to sue for past, present and future
infringements thereof (collectively, the "COPYRIGHTS");
(r) all license and distribution agreements and covenants not
to sue with any other party with respect to any Patent, Trademark, or
Copyright, whether such Pledgor is a licensor or licensee, distributor
or distributee under any such license or distribution agreement, along
with any and all (i) renewals, extensions, supplements and
continuations thereof, (ii) income, fees, royalties, damages, claims
and payments now and hereafter due and/or payable thereunder and with
respect thereto, including, without limitation, damages and payments
for past, present or future infringements or violations
<PAGE>
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thereof, (iii) rights to sue for past, present and future infringements
or violations thereof and (iv) any other rights to use, exploit or
practice any or all of the Patents, Trademarks or Copyrights
(collectively, the "LICENSES");
(s) the entire goodwill connected with such Pledgor's business
including, without limitation, (i) all goodwill connected with the use
of and symbolized by any of the Intellectual Property Collateral in
which such Pledgor has any interest, (ii) all know-how, trade secrets,
customer lists, proprietary information, inventions, methods,
procedures, formulae, descriptions, name plates, catalogs, confidential
information, consulting agreements, engineering contracts and such
other assets which relate to such goodwill and (iii) all product lines
of such Pledgor's business (collectively, the "GOODWILL");
(t) all accounts maintained with a financial institution (each
such financial institution, a "Financial Intermediary") and all
investment property (as defined in the UCC) of such Pledgor, including,
without limitation, (i) all moneys, financial assets (as defined in the
UCC), checks, drafts, securities and instruments deposited or required
to be deposited in such accounts, (ii) all investments and all
certificates and instruments, if any, from time to time representing or
evidencing any other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
the foregoing items listed under subclause (i), and (iii) each consent
or other agreement from time to time entered into by such Pledgor with
any financial institution at which any of the financial accounts is
maintained and all rights of such Pledgor under each such consent or
agreement;
(u) all "documents", as such term is defined in the UCC,
including, without limitation, all receipts of such Pledgor covering,
evidencing or representing Inventory or Equipment (collectively, the
"DOCUMENTS");
(v) all "instruments", as such term is defined in the UCC,
including, without limitation, all promissory notes, drafts, bills of
exchange or acceptances (collectively, the "INSTRUMENTS"); and
(w) all "proceeds", as such term is defined in the UCC or
under other relevant law, and in any event including, without
limitation, any and all (i) proceeds of any insurance (except payments
made to a Person which is not a party to this Agreement), indemnity,
warranty, guaranty or claim payable to Administrative Agent or to such
Pledgor from time to time with respect to any of the Pledged
Collateral, (ii) payments (in any form whatsoever) made or due and
payable to such Pledgor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Pledged Collateral by any Governmental Authority (or
any Person acting on behalf of a Governmental Authority), (iii)
instruments representing obligations to pay amounts in respect of the
Pledged Collateral, (iv) products of the Pledged Collateral and (v)
other amounts from time to time paid or payable under or in connection
with any of the Pledged Collateral (collectively, the "PROCEEDS").
Notwithstanding the foregoing, to the extent that the
provision of any agreement binding on any Pledgor that governs any intangible
personal property referred to in any of clauses (a) through (w) above expressly
prohibits the pledge, assignment or transfer thereof, or the grant of a security
interest therein, such Pledgor's right, title and interest in such property
shall be excluded from the foregoing pledge, assignment, transfer and grant for
so long as such prohibition continues, it being understood that upon request of
Administrative Agent after the occurrence and during the continuance of an Event
of Default, such Pledgor will in good faith
<PAGE>
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use reasonable efforts to obtain consent for the pledge, assignment, transfer
and creation of a security interest in favor of Administrative Agent in such
Pledgor's right, title and interest in such property. Pursuant to a Sharing and
General Allocation Agreement dated as of November 1, 1998 among Quest
Diagnostics Venture LLC, a Pennsylvania limited liability company (the "UPMC
LLC") and a Qualified Joint Venture, Quest Diagnostics of Pennsylvania, Inc., a
Delaware corporation ("Quest Pennsylvania") and UPMC Health System Diversified
Services, Inc. (such agreement, as amended from time to time to the extent any
such amendment is not materially adverse to the interest of Administrative Agent
therein being the "Sharing Agreement"), Quest Pennsylvania may from time to time
bill in its own name for certain services for which the revenues belong to UPMC
LLC (such services being "UPMC Services"). Notwithstanding the foregoing,
Administrative Agent agrees that accounts receivable (and proceeds therefrom)
for UPMC LLC Services are excluded from the foregoing pledge, assignment,
transfer and grant.
The Pledged Securities, the Intercompany Debt, the
Distributions and the Proceeds relating thereto are collectively referred to as
the "SECURITIES COLLATERAL". The Patents, Trademarks, Copyrights, Licenses,
Goodwill and the Proceeds relating thereto are collectively referred to as the
"INTELLECTUAL PROPERTY COLLATERAL". The property described in clause (t) above
and the Proceeds relating thereto are collectively referred to as the "FINANCIAL
ACCOUNT COLLATERAL". The Pledged Collateral other than the Securities
Collateral, the Intellectual Property Collateral and the Financial Account
Collateral is collectively referred to as the "GENERAL COLLATERAL".
Section 2. SECURED OBLIGATIONS. This Agreement secures, and
the Pledged Collateral is collateral security for, the payment and performance
in full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under SECTION 362(A) of the Bankruptcy Code,
11 U.S.C. SS. 362(a)), of (i) with respect to the Borrower, all Obligations oF
Borrower now existing or hereafter arising under or in respect of the Credit
Agreement and all Swap Obligations of Borrower now existing or hereafter arising
under or in respect of any Secured Swap Contract (including, without limitation,
the obligations of Borrower to pay principal, interest and all other charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the Obligations contained in the Credit
Agreement and the obligations contained in any Secured Swap Contract), (ii) with
respect to each Guarantor, all Obligations of such Guarantor now existing or
hereafter arising under or in respect of the Credit Agreement (including,
without limitation, the obligations of such Guarantor to pay principal, interest
and all other charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and other payments related to or in respect of the Obligations
contained in the Credit Agreement) and (iii) without duplication of the amounts
described in clauses (i) and (ii), all Obligations of the Pledgors now existing
or hereafter arising under or in respect of this Agreement or any other Security
Document, including, without limitation, all charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and other payments related to
or in respect of the Obligations contained in this Agreement or in any other
Security Document, in each case whether in the regular course of business or
otherwise (the obligations described in clauses (i), (ii) and (iii) of this
SECTION 2, collectively, the "SECURED OBLIGATIONS").
Section 3. NO RELEASE. Nothing set forth in this Agreement
shall relieve any Pledgor from the performance of any term, covenant, condition
or agreement on such Pledgor's part to be performed or observed under or in
respect of any of the Pledged Collateral or from any liability to any Person
under or in respect of any of the Pledged Collateral or shall impose any
obligation on Administrative Agent or any other Secured Party to perform or
observe any such term, covenant, condition or agreement on such Pledgor's part
to be so performed or observed or shall impose any liability on Administrative
Agent or any other Secured Party for any act or omission on the part of such
Pledgor relating thereto or for any breach of any representation or warranty on
the part of such Pledgor contained in this Agreement or under or in respect of
the Pledged Collateral or made in
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connection herewith or therewith. The obligations of each Pledgor referred to in
this Section 3 shall survive the termination of this Agreement and the discharge
of such Pledgor's other obligations under this Agreement, any Swap Contract and
the other Credit Documents.
Section 4. PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES; USE OF
PLEDGED COLLATERAL.
(a) DELIVERY OF CERTIFICATED SECURITIES COLLATERAL. All
certificates, agreements or instruments representing or evidencing the
Securities Collateral, to the extent not previously delivered to
Administrative Agent, shall immediately upon receipt thereof by any
Pledgor be delivered to Administrative Agent pursuant hereto. All
certificated Securities Collateral shall be in suitable form for
transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to Administrative Agent.
Administrative Agent shall have the right, at any time upon the
occurrence and during the continuance of any Event of Default and
without notice to any Pledgor, to endorse, assign or otherwise transfer
to or to register in the name of Administrative Agent or any of its
nominees or endorse for negotiation any or all of the Securities
Collateral, without any indication that such Securities Collateral is
subject to the security interest hereunder. In addition, Administrative
Agent shall have the right at any time to exchange certificates
representing or evidencing Pledged Securities for certificates of
smaller or larger denominations.
(b) PERFECTION OF UNCERTIFICATED SECURITIES COLLATERAL. If any
issuer of Pledged Securities is organized in a jurisdiction which does
not permit the use of certificates to evidence equity ownership, or if
any of the Pledged Securities are at any time not evidenced by
certificates of ownership, then each applicable Pledgor shall, to the
extent permitted by applicable Law, record such pledge on the
equityholder register or the books of the issuer, cause the issuer to
execute and deliver to Administrative Agent an acknowledgment of the
pledge of such Pledged Securities substantially in the form of EXHIBIT
1 annexed hereto, execute any customary pledge forms or other documents
necessary or appropriate to complete the pledge and give Administrative
Agent the right to transfer such Pledged Securities under the terms
hereof and provide to Administrative Agent upon written request an
opinion of counsel, in form and substance satisfactory to
Administrative Agent, confirming such pledge.
(c) FINANCING STATEMENTS AND OTHER FILINGS. The only filings,
registrations and recordings necessary to create, preserve, protect and
perfect the security interest granted by each Pledgor to Administrative
Agent pursuant to this Agreement in respect of the Pledged Collateral
are listed in ANNEX A annexed hereto. All such filings, registrations
and recordings will be filed, registered and recorded contemporaneously
with the initial funding under the Credit Agreement. Each Pledgor
agrees that at any time and from time to time, it will execute and, at
the sole cost and expense of the Pledgors file and refile, or permit
Administrative Agent to file and refile, such financing statements,
continuation statements and other documents (including, without
limitation, this Agreement), in form acceptable reasonably to
Administrative Agent, in such offices (including, without limitation,
the United States Patent and Trademark Office and the United States
Copyright Office) as Administrative Agent may deem necessary or
appropriate, wherever required by law in order to perfect, continue and
maintain a valid, enforceable security interest in the Pledged
Collateral as provided herein and to preserve the other rights and
interests granted to Administrative Agent hereunder, as against third
parties, with respect to any Pledged Collateral. Each Pledgor
authorizes Administrative Agent to file any such financing or
continuation statement or other document without the signature of such
Pledgor where permitted by law.
(d) MOTOR VEHICLES. At any time after the occurrence and
during the continuance of an Event of Default, each Pledgor shall, upon
the request of Administrative Agent, deliver to Administrative
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Agent originals of the certificates of title or ownership for the motor
vehicles (and any other Equipment covered by certificates of title or
ownership owned by it) with Administrative Agent listed therein as
lienholder.
(e) SUPPLEMENTS; FURTHER ASSURANCES. Each Pledgor agrees to do
such further acts and things, and to execute and deliver to
Administrative Agent such additional assignments, agreements,
supplements, powers and instruments, as Administrative Agent may deem
necessary or appropriate, wherever required by Law, in order to
perfect, preserve and protect the security interest in the Pledged
Collateral as provided herein and the rights and interests granted to
Administrative Agent hereunder, to carry into effect the purposes of
this Agreement or better to assure and confirm to Administrative Agent
or permit Administrative Agent to exercise and enforce its respective
rights, powers and remedies hereunder with respect to any Pledged
Collateral. Without limiting the foregoing, each Pledgor shall make,
execute, endorse, acknowledge, file or refile and/or deliver to
Administrative Agent from time to time upon the reasonable request of
Administrative Agent such lists, descriptions and designations of the
Pledged Collateral, copies of warehouse receipts, receipts in the
nature of warehouse receipts, bills of lading, documents of title,
vouchers, invoices, schedules, confirmatory assignments, supplements,
additional security agreements, conveyances, financing statements,
transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments. Administrative Agent may institute and
maintain upon prior notice to Borrower and such Pledgor, in its own
name or in the name of any Pledgor, such suits and proceedings as
Administrative Agent may be advised in writing by counsel shall be
necessary or expedient to prevent any material impairment of the
security interest in or perfection of the Pledged Collateral. All of
the foregoing shall be at the sole cost and expense of the Pledgors.
(f) USE AND PLEDGE OF PLEDGED COLLATERAL. Unless an Event of
Default shall have occurred and be continuing, Administrative Agent
shall from time to time execute and deliver, upon written request of
any Pledgor and at the sole cost and expense of the Pledgors, any and
all proxies, instruments, certificates or other documents, in a form
reasonably requested by such Pledgor, necessary or appropriate in the
reasonable judgment of such Pledgor to enable such Pledgor to continue
to exploit, license, use, enjoy and protect the Pledged Collateral,
except as may be prohibited by the terms of this Agreement or the
Credit Agreement. The Pledgors and Administrative Agent acknowledge
that this Agreement is intended to grant to Administrative Agent for
the benefit of the Secured Parties a security interest in and Lien upon
the Pledged Collateral and shall not constitute or create a present
assignment of any of the Pledged Collateral.
Section 5. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each
Pledgor represents, warrants and covenants as follows:
(a) PERFECTION ACTIONS; PRIOR LIENS. Upon the completion of
the deliveries, filings and other actions contemplated in SUBSECTIONS
4(A) through 4(C) hereof and SUBSECTIONS 9(A) and 9(B) hereof, the
security interest granted to Administrative Agent for the benefit of
the Secured Parties pursuant to this Agreement in and to the Pledged
Collateral will constitute a perfected security interest therein,
superior and prior to the rights of all other Persons therein other
than with respect to (i) the Liens identified on ANNEX B relating to
the items of Pledged Collateral identified on such annex, (ii) with
respect to General Collateral acquired after the date hereof, Liens of
the type described in clauses (c), (d), (g) and (m) of the definition
of Permitted Liens and clauses (h) - (j) of the definition of Permitted
Customary Liens and (iii) Subordinate Liens (as hereinafter defined)
created or authorized under any Law of any applicable Governmental
Authority if and to the extent that the Law creating or authorizing
such Lien provides that such Lien is superior to the Lien and security
interest created and
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evidenced hereby (the Liens described in clause (iii), the
"Governmental Prior Liens", and the Liens described in CLAUSES (I),
(II) and (III), "PRIOR LIENS").
(b) NO LIENS. Such Pledgor is as of the date hereof, and, as
to Pledged Collateral acquired by it from time to time after the date
hereof, such Pledgor will be, the sole direct and beneficial owner of
its interest in all Pledged Collateral pledged by it hereunder free
from any Lien or other right, title or interest of any Person other
than (i) Prior Liens, (ii) the Lien and security interest created by
this Agreement and (iii) Subordinate Liens. Pledgor shall defend the
Pledged Collateral pledged by it hereunder against all claims and
demands of all Persons at any time claiming any interest therein
adverse to Administrative Agent or any other Secured Party. There is no
agreement, and no Pledgor shall enter into any agreement or take any
other action, that would result in the imposition of any other Lien,
restrict the transferability of any of the Pledged Collateral or
otherwise impair or conflict with such Pledgors' obligations or the
rights of Administrative Agent hereunder.
"SUBORDINATE LIENS" shall mean (A) with respect to the General
Collateral, Liens of the type described in clauses (b), (c), (d), (f),
(g) and (h) of the definition of Permitted Liens and Liens of the type
described in SUBSECTION 5[(D)] of this Agreement (PROVIDED, HOWEVER,
that such Pledgor shall comply with the provisions of SUBSECTION 5(O)
of this Agreement) and (B) with respect to all other Pledged
Collateral, Liens of the type described in SUBSECTION 5(O) of this
Agreement (PROVIDED, HOWEVER, that such Pledgor shall comply with the
provisions of SUBSECTION 5(O) of this Agreement).
(c) OTHER FINANCING STATEMENTS. There is no (nor will there be
any) valid or effective financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) covering
or purporting to cover any interest of any kind in the Pledged
Collateral other than those relating to (i) Prior Liens, (ii) this
Agreement and (iii) Subordinate Liens, and so long as any of the
Secured Obligations remain unpaid or the Commitments of the Lenders to
make any Loan or to issue any Letter of Credit shall not have expired
or been sooner terminated, no Pledgor shall execute, authorize or
permit to be filed in any public office any financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to any Pledged Collateral, except,
in each case, financing statements filed or to be filed in respect of
and covering the security interests granted by such Pledgor pursuant to
this Agreement and financing statements relating to Prior Liens or
Subordinate Liens that in each such case do not constitute Governmental
Prior Liens.
(d) CHIEF EXECUTIVE OFFICE; CHANGE OF NAME. The chief
executive office of such Pledgor is located at the address indicated
next to its name in ANNEX C annexed hereto. Such Pledgor shall not move
its chief executive office, except to such new location as such Pledgor
may establish in accordance with the last sentence of this SUBSECTION
5(D). Such Pledgor shall not establish a new location for its chief
executive office nor shall it change its name until (i) it shall have
given Administrative Agent not less than thirty (30) days' prior
written notice of its intention so to do, clearly describing such new
location or name and (ii) with respect to such new location or name,
such Pledgor shall have taken all action reasonably satisfactory to
Administrative Agent to maintain the perfection and priority of the
security interest of Administrative Agent for the benefit of the
Secured Parties in the Pledged Collateral intended to be granted
hereby, including, without limitation, obtaining waivers of landlord's
or warehouseman's liens with respect to such new location.
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(e) LOCATION OF EQUIPMENT. The principal laboratories where
Equipment held on the date hereof by such Pledgor is located are at the
addresses indicated next to its name in ANNEX C annexed hereto. The
principal laboratories where Equipment now held or subsequently
acquired shall be kept are located at one or more of the locations
listed in ANNEX C annexed hereto, or such new location as such Pledgor
may establish if with respect to such new location, such Pledgor shall
have taken all action reasonably satisfactory to Administrative Agent
to perfect the security interest of Administrative Agent for the
benefit of the Secured Parties in the Pledged Collateral intended to be
granted hereby to the extent such security interest is not already
perfected.
(f) DUE AUTHORIZATION AND ISSUANCE. All of the Pledged Shares
have been, and to the extent hereafter issued will be upon such
issuance, duly authorized, validly issued and fully paid and
nonassessable. All of the Initial Pledged Interests have been fully
paid for, and there is no amount or other obligation owing by any
Pledgor to any issuer of the Initial Pledged Interests in exchange for
or in connection with the issuance of the Initial Pledged Interests or
any Pledgor's status as a partner or a member of any issuer of the
Initial Pledged Interests.
(g) NO VIOLATIONS, ETC. The pledge of the Pledged Securities
pursuant to this Agreement does not violate REGULATION T, U OR X of the
Federal Reserve Board.
(h) NO OPTIONS, WARRANTS, ETC. There are no options, warrants,
calls, rights, commitments or agreements of any character to which such
Pledgor is a party or by which it is bound obligating such Pledgor to
issue, deliver or sell or cause to be issued, delivered or sold,
additional Pledged Securities or obligating such Pledgor to grant,
extend or enter into any such option, warrant, call, right, commitment
or agreement. There are no voting trusts or other agreements or
understandings to which such Pledgor is a party with respect to the
transfer, voting or exercise of any other right of the equity interests
of any issuer of the Pledged Securities.
(i) [Reserved].
(j) AUTHORIZATION, ENFORCEABILITY. Such Pledgor has the
requisite organizational power, authority and legal right to pledge and
grant a security interest in all the Pledged Collateral pledged by it
pursuant to this Agreement, and this Agreement constitutes the legal,
valid and binding obligation of such Pledgor, enforceable against such
Pledgor in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
(k) NO CONFLICTS, CONSENTS, ETC. Neither the execution and
delivery of this Agreement by each Pledgor nor the consummation of the
transactions herein contemplated nor the fulfillment of the terms
hereof (i) violates any charter or by-laws or other organizational
document of such Pledgor or any issuer of Pledged Securities, (ii)
violates the terms of any agreement, indenture, mortgage, deed of
trust, equipment lease, instrument or other document to which such
Pledgor is a party, or by which it may be bound or to which any of its
properties or assets may be subject, which violation or conflict could
reasonably be expected to have a Material Adverse Effect, (iii)
conflicts with any law, order, rule or regulation applicable to any
such Pledgor of any Governmental Authority having jurisdiction over
such Pledgor or its property, or (iv) results in or requires the
creation or imposition of any Lien (other
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than the Lien contemplated hereby) upon or with respect to any of the
property now owned or hereafter acquired by such Pledgor. No material
consent of any party (including, without limitation, equityholders or
creditors of such Pledgor or any account debtor under a Receivable) and
no material consent, authorization, approval, license or other action
by, and no notice to or filing with, any Governmental Authority or
regulatory body or other Person is required for (x) the pledge by such
Pledgor of the Pledged Collateral pledged by it pursuant to this
Agreement or for the execution, delivery or performance of this
Agreement by such Pledgor, (y) the exercise by Administrative Agent of
the rights provided for in this Agreement or (z) the exercise by
Administrative Agent of the remedies in respect of the Pledged
Collateral pursuant to this Agreement, other than, with respect to
clauses (y) and (z) notifications and filings relating to permits and
licenses issued by any Governmental Authority. In the event that
Administrative Agent desires to exercise any remedies, voting or
consensual rights or attorney-in-fact powers set forth in this
Agreement and determines it necessary to obtain any approvals or
consents of any Governmental Authority or any other Person therefor,
then, upon the reasonable request of Administrative Agent, such Pledgor
agrees to use its best efforts to assist and aid Administrative Agent
to obtain as soon as practicable any necessary approvals or consents
for the exercise of any such remedies, rights and powers.
(l) PLEDGED COLLATERAL. All information set forth herein,
including the schedules and annexes attached hereto, and all
information contained in any documents, schedules and lists heretofore
delivered to any Secured Party in connection with this Agreement, in
each case, relating to the Pledged Collateral, is accurate and complete
in all material respects. The Pledged Collateral described on the
schedules attached hereto constitutes all of the property of such type
of Pledged Collateral owned or held by the Pledgors.
(m) INSURANCE. No Pledgor shall take any action that impairs
the rights of Administrative Agent or any Secured Party in the Pledged
Collateral. Each Pledgor shall at all times keep the Inventory and
Equipment insured in accordance with the provisions of Section 9.04 of
the Credit Agreement.
(n) INSURANCE PROCEEDS. Any proceeds of insurance received by
any Pledgor shall constitute Net Available Proceeds and shall be
applied by it as provided in SECTION 2.10(A)(I) of the Credit
Agreement. In the event that any Pledgor is permitted to and elects to
apply such proceeds to the repair or replacement of any item of Pledged
Collateral, such Pledgor shall upon its receipt of such proceeds from
Administrative Agent promptly commence and diligently continue to
perform such repair or promptly effect such replacement. Upon the
occurrence and during the continuance of any Event of Default,
Administrative Agent shall have the option to apply any proceeds of
insurance received by any Pledgor in respect of the Pledged Collateral
toward the payment of the Secured Obligations in accordance with
SECTION 13 hereof or to continue to hold such proceeds as additional
collateral to secure the performance by the Pledgors of the Secured
Obligations.
(o) PAYMENT OF TAXES; COMPLIANCE WITH LAWS; CLAIMS. Each
Pledgor shall pay prior to the date on which any penalties would attach
thereto all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for
labor, materials, warehousing and supplies) against, the Pledged
Collateral. Each Pledgor shall comply with all Laws applicable to the
Pledged Collateral the failure to comply with which would have a
material adverse effect on the value of the Pledged Collateral or an
adverse effect on the Lien on such Pledged Collateral granted to
Administrative Agent hereunder. Notwithstanding the foregoing, each
Pledgor may at its
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own expense contest the amount or applicability of any of the
obligations described in the preceding sentences of this SUBSECTION
5(O) by appropriate legal or administrative proceedings, prosecution of
which operates to prevent the collection thereof and the sale or
forfeiture of the Pledged Collateral or any part thereof to satisfy the
same; PROVIDED, HOWEVER, that in connection with such contest, such
Pledgor shall have made provision for the payment of such contested
amount on such Pledgor's books if and to the extent required by
generally accepted accounting principles. Notwithstanding the foregoing
provisions of this SUBSECTION 5(O), (x) no contest of any such
obligation may be pursued by such Pledgor if such contest would expose
Administrative Agent or any other Secured Party to (A) any possible
criminal liability or (B) unless such Pledgor shall have furnished a
bond or, other security therefor satisfactory to Administrative Agent,
any other affected Secured Party, any additional civil liability for
failure to comply with such obligation and (y) if at any time payment
of any obligation imposed upon such Pledgor by this SUBSECTION 5(O)
shall become necessary to prevent the imposition of remedies because of
non-payment, such Pledgor shall pay the same in sufficient time to
prevent the imposition of remedies in respect of such default or
prospective default.
(p) ACCESS TO BOOKS AND RECORDS. Upon reasonable request to
such Pledgor, Administrative Agent shall have full and free access
during normal business hours to all of the books, correspondence and
records of such Pledgor relating to the Pledged Collateral, and
Administrative Agent and its representatives may examine the same, take
extracts therefrom and make photocopies thereof.
Section 6. SPECIAL PROVISIONS CONCERNING GENERAL COLLATERAL.
(a) SPECIAL REPRESENTATIONS AND WARRANTIES. [Reserved].
(b) MAINTENANCE OF RECORDS. Each Pledgor shall keep and
maintain at its own cost and expense appropriate records of each
Receivable, in a manner consistent with its past business practice.
Each Pledgor shall, at such Pledgor's sole cost and expense, upon
Administrative Agent's written demand made at any time after the
occurrence and during the continuance of any Event of Default, deliver
all documents evidencing Receivables and any books and records relating
thereto in its possession to Administrative Agent or to its
representatives (copies of which evidence and books and records may be
retained by such Pledgor). Upon the occurrence and during the
continuance of any Event of Default and following the exercise by the
Lenders of their remedies in accordance with Section 10 of the Credit
Agreement, Administrative Agent may transfer a full and complete copy
of any Pledgor's books, records, credit information, reports, memoranda
and all other writings relating to the Receivables to and for the use
by any Person that has acquired or is contemplating acquisition of an
interest in the Receivables or Administrative Agent's security interest
therein without the consent of any Pledgor.
(c) [Reserved].
(d) MODIFICATION OF TERMS, ETC. No Pledgor shall rescind or
cancel any indebtedness evidenced by any Receivable or modify any term
thereof or make any adjustment with respect thereto except in the
ordinary course of business consistent with industry practice, or
extend or renew any such indebtedness except in the ordinary course of
business consistent with industry practice or compromise or settle any
dispute, claim, suit or legal proceeding relating thereto except in the
ordinary course of business consistent with prudent business practice
or sell any Receivable or interest therein without the prior written
consent of Administrative Agent and otherwise as permitted under the
Credit Agreement.
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(e) COLLECTION. Each Pledgor shall use reasonable commercial
efforts to cause to be collected from the account debtor of each of the
Receivables any and all amounts owing under or on account of such
Receivable after taking into account disallowances, discounts and other
sales adjustments in accordance with such Pledgor's ordinary course of
business consistent with its collection practices as in effect from
time to time.
(f) [Reserved].
(g) CASH COLLATERAL. Upon the occurrence and during the
continuance of any Event of Default, if Administrative Agent so
directs, each Pledgor shall cause all payments on account of the
Receivables to be held by Administrative Agent as cash collateral in
accordance with the provisions of SUBSECTIONS 9(E) and 9(F) hereof.
Without notice to or assent by any Pledgor, Administrative Agent may
apply any or all amounts then or thereafter held as cash collateral in
the manner provided in SUBSECTIONS 9(E) and 9(F).
(h) WAREHOUSE RECEIPTS NON-NEGOTIABLE. If any warehouse
receipt or receipt in the nature of a warehouse receipt is issued with
respect to any of the Inventory, the applicable Pledgor shall not
permit such warehouse receipt or receipt in the nature thereof to be
"negotiable" (as such term is used in SECTION 7-104 of the UCC or under
other relevant law).
(i) CONSENTS TO ASSIGNMENT OF CONTRACTS. After the occurrence
and during the continuance of an Event of Default, to the extent that
any contract or other agreement of any Pledgor would constitute a
Contract hereunder but for the exclusions contained in the provisos in
the definition of "Contracts" hereunder, such Pledgor shall use its
best efforts to cause the counterparty thereto to deliver the consent
contemplated in the provisos of such definition within 30 days after
the date hereof. For purposes of this SUBSECTION 6(J), "best efforts"
shall not require such Obligor to pay or cause to be paid any
renumeration to any such counterparty in order to obtain such consent
to the extent that it would be commercially unreasonable to do so.
(j) FAIR LABOR STANDARDS ACT. Any goods now or hereafter
produced by each Pledgor included in the Pledged Collateral have been
and will be produced in substantial compliance with the requirements of
the Fair Labor Standards Act of 1938, as amended.
Section 7. SPECIAL PROVISIONS CONCERNING SECURITIES
COLLATERAL.
(a) PLEDGE OF ADDITIONAL SECURITIES. Each Pledgor shall, upon
obtaining any Pledged Securities or Intercompany Debt of any Person,
accept the same in trust for the benefit of Administrative Agent and
promptly (and in any event within five Business Days) deliver to
Administrative Agent a pledge amendment, duly executed by such Pledgor,
in substantially the form of EXHIBIT 3 annexed hereto (each, a "PLEDGE
AMENDMENT"), and the certificates and other documents required under
SUBSECTIONS 4(A) and 4(B) in respect of the additional Pledged
Securities or Intercompany Debt which are to be pledged pursuant to
this Agreement, and confirming the attachment of the Lien hereby
created on and in respect of such additional property. Each Pledgor
hereby authorizes Administrative Agent to attach each Pledge Amendment
to this Agreement and agrees that all Pledged Securities or
Intercompany Debt listed on any Pledge Amendment delivered to
Administrative Agent shall for all purposes hereunder be considered
Pledged Collateral.
(b) VOTING RIGHTS; DISTRIBUTIONS; ETC.
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(i) So long as no Event of Default shall have
occurred and be continuing and Administrative Agent shall not
have notified the Pledgors otherwise:
(A) Each Pledgor shall be entitled to
exercise any and all voting and other consensual
rights pertaining to the Securities Collateral or any
part thereof for any purpose not inconsistent with
the terms or purposes of this Agreement or any other
Credit Document; PROVIDED, HOWEVER, that no Pledgor
shall in any event exercise such rights in any manner
which may have a material adverse effect on the value
of the Pledged Collateral taken as a whole or an
adverse effect on the security intended to be
provided by this Agreement.
(B) Each Pledgor shall be entitled to
receive and retain, and to utilize free and clear of
the Lien of this Agreement, any and all
Distributions, but only if and to the extent made in
accordance with the provisions of the Credit
Agreement; PROVIDED, HOWEVER, that any and all such
Distributions consisting of rights or interests in
the form of securities shall be forthwith delivered
to Administrative Agent to hold as Pledged Collateral
and shall, if received by any Pledgor, be received in
trust for the benefit of Administrative Agent, be
segregated from the other property or funds of such
Pledgor and be forthwith delivered to Administrative
Agent as Pledged Collateral in the same form as so
received (with any necessary endorsement).
(C) Administrative Agent shall be deemed
without further action or formality to have granted
to each Pledgor all necessary proxies and consents
relating to voting rights and shall, upon written
request of any Pledgor and at the sole cost and
expense of the Pledgors, from time to time execute
and deliver (or cause to be executed and delivered)
to such Pledgor all such proxies and instruments as
such Pledgor may reasonably request in order to
permit such Pledgor to exercise the voting and other
rights which it is entitled to exercise hereunder and
under the other Credit Documents and to receive the
Distributions which it is authorized to receive and
retain pursuant to SUBSECTION 7(B)(I)(B) hereof.
(ii) Upon the occurrence and during the continuance
of any Event of Default and upon notice by Administrative
Agent to the Pledgors of the suspension of the rights of the
Pledgors under Section 7(b)(i) above :
(A) All rights of each Pledgor to exercise
the voting and other consensual rights it would
otherwise be entitled to exercise pursuant to
SUBSECTION 7(B)(I)(A) hereof shall cease upon notice
by Administrative Agent to such Pledgor, and all such
rights shall thereupon become vested in
Administrative Agent, which shall thereupon have the
sole right to exercise such voting and other
consensual rights.
(B) All rights of each Pledgor to receive
Distributions which it would otherwise be entitled to
receive and retain pursuant to SUBSECTION 7(B)(I)(B)
hereof shall cease and all such rights shall
thereupon become vested in Administrative Agent,
which shall thereupon have the sole right to receive
and hold as Pledged Collateral such Distributions.
<PAGE>
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(iii) Each Pledgor shall, at its sole cost and
expense, from time to time execute and deliver to
Administrative Agent appropriate instruments as Administrative
Agent may reasonably request in order to permit Administrative
Agent to exercise the voting and other rights which it may be
entitled to exercise pursuant to SUBSECTION 7(B)(II)(A) hereof
and to receive all Distributions which it may be entitled to
receive under SUBSECTION 7(B)(II)(B) hereof.
(iv) All Distributions which are received by any
Pledgor contrary to the provisions of SUBSECTION 7(B)(II)(B)
hereof shall be received in trust for the benefit of
Administrative Agent, shall be segregated from other funds of
such Pledgor and shall immediately be paid over to
Administrative Agent as Pledged Collateral in the same form as
so received (with any necessary endorsement).
(c) NO NEW SECURITIES. Each Pledgor shall cause each issuer of
the Pledged Securities not to issue any stock or other securities or
equity interests in addition to or in substitution for the Pledged
Securities issued by such issuer, except to such Pledgor.
(d) OPERATIVE AGREEMENTS. Each Pledgor has delivered to
Administrative Agent true, correct and complete copies of the Operative
Agreements. The Operative Agreements are in full force and effect, have
not as of the date hereof been amended or modified, and there is no
existing default by any party thereunder or any event which, with the
giving of notice of passage of time or both, would constitute a default
by any party thereunder. Each Pledgor shall deliver to Administrative
Agent a copy of any notice of default given or received by it under any
Operative Agreement within ten (10) days after such Pledgor gives or
receives such notice. No Pledgor will terminate or agree to terminate
any Operative Agreement or make any amendment or modification to any
Operative Agreement which may have an adverse effect on the value of
the Pledged Interests or the security intended to be provided by this
Agreement.
Section 8. SPECIAL PROVISIONS CONCERNING INTELLECTUAL PROPERTY
COLLATERAL.
(a) GRANT OF LICENSE. For the purpose of enabling
Administrative Agent, during the continuance of an Event of Default, to
exercise rights and remedies under SECTION 12 hereof at such time as
Administrative Agent shall be lawfully entitled to exercise such rights
and remedies, and for no other purpose, each Pledgor hereby grants to
Administrative Agent, to the extent assignable, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to such Pledgor) to use, assign, license or sublicense any
of the Intellectual Property Collateral now owned or hereafter acquired
by such Pledgor, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed
items may be recorded or stored and to all computer programs used for
the compilation or printout thereof.
(b) REGISTRATIONS. Except pursuant to licenses and other user
agreements entered into by any Pledgor in the ordinary course of
business and licenses between Pledgors, on and as of the date hereof
(i) each Pledgor owns and possesses the right to use, and has done
nothing to authorize or enable any other Person to use, any Patent or
Trademark listed in SCHEDULES III and IV, respectively, and (ii) all
registrations listed in SCHEDULES III and IV are valid and in full
force and effect.
(c) NO VIOLATIONS OR PROCEEDINGS. To each Pledgor's knowledge,
on and as of the date hereof, except as would not result in a Material
Adverse Effect, (i) there is no violation by others of any right of
such Pledgor with respect to any Patent or Trademark listed in
SCHEDULES III and IV annexed
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hereto, respectively, pledged by it under the name of such Pledgor,
except as set forth in such Schedules, (ii) such Pledgor is not
infringing upon any Patent or Trademark of any other Person and (iii)
no proceedings have been instituted or are pending against such Pledgor
or, to such Pledgor's knowledge, threatened, and no claim against such
Pledgor has been received by such Pledgor, alleging any such violation,
except as may be set forth in SCHEDULE III or IV.
(d) [Reserved].
(e) [Reserved].
(f) MODIFICATIONS. Each Pledgor authorizes Administrative
Agent to modify this Agreement by amending SCHEDULES III and IV hereto
to include any future Intellectual Property Collateral of such Pledgor.
(g) APPLICATIONS. Each Pledgor shall file and prosecute
diligently all applications for the Patents, the Trademarks or the
Copyrights now or hereafter pending that would be necessary to the
operation of such Pledgor's business as presently conducted and as
contemplated by the Credit Agreement to which any such applications
pertain, and shall do all acts necessary to preserve and maintain all
rights in the Intellectual Property Collateral necessary to the
operation of such Pledgor's business as presently conducted and as
contemplated by the Credit Agreement. Any and all costs and expenses
incurred in connection with any such actions shall be borne by the
Pledgors. No Pledgor shall abandon any right to file a Patent,
Trademark or Copyright application, or any pending Patent, Trademark or
Copyright application or any Patent, Trademark or Copyright necessary
for the operation of such Pledgor's business as presently conducted and
as contemplated by the Credit Agreement without the consent of
Administrative Agent.
(h) LITIGATION.
(i) Unless there shall occur and be continuing any
Event of Default, each Pledgor shall have the right to
commence and prosecute in its own name, as the party in
interest, for its own benefit and at the sole cost and expense
of the Pledgors, such applications for protection of the
Intellectual Property Collateral and suits, proceedings or
other actions for infringement, counterfeiting, unfair
competition, dilution or other damage as are in its reasonable
business judgment necessary to protect the Intellectual
Property Collateral. Each Pledgor shall promptly notify
Administrative Agent in writing as to the commencement and
prosecution of any such actions, or threat thereof relating to
the Intellectual Property Collateral, and shall provide to
Administrative Agent such information with respect thereto as
may be reasonably requested by Administrative Agent.
(ii) Upon the occurrence and during the continuance
of any Event of Default, Administrative Agent shall have the
right but shall in no way be obligated to file applications
for protection of the Intellectual Property Collateral and/or
bring suit in the name of any Pledgor, Administrative Agent or
the Secured Parties to enforce the Intellectual Property
Collateral and any license thereunder. In the event of such
suit, each Pledgor shall, at the written request of
Administrative Agent, do any and all lawful acts and execute
any and all documents requested by Administrative Agent in aid
of such enforcement. In the event that Administrative Agent
shall elect not to bring suit to enforce the Intellectual
Property Collateral, each Pledgor agrees, at the request of
Administrative Agent, to use all reasonable measures,
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whether by action, suit, proceeding or otherwise, to prevent
the infringement, counterfeiting or other diminution in value
of any of the Intellectual Property Collateral by others and
for that purpose agrees to diligently maintain any action,
suit or proceeding against any person so infringing necessary
to prevent such infringement unless such Pledgor has
determined that such Intellectual Property Collateral that is
the subject of any pending or contemplated infringement or
enforcement action or proceeding does not contain or represent
any value or utility (other than of an immaterial nature),
consistent with prudent business practice.
Section 9. SPECIAL PROVISIONS CONCERNING FINANCIAL ACCOUNTS.
Each Pledgor shall comply with the covenants and make the representations and
warranties contained in clauses (a) through (d) below after the occurrence and
during the continuance of an Event of Default. Each Pledgor shall comply with
the covenants and make the representations and warranties contained in clauses
(e) through (h) below from and after the date hereof.
(a) FINANCIAL ACCOUNTS. Each Pledgor shall notify each
Financial Intermediary that any Financial Account Collateral maintained
with such Financial Intermediary by such Pledgor is under the exclusive
dominion and control of Administrative Agent and that all moneys,
financial assets, checks, drafts, securities, instruments and other
property deposited with such Financial Intermediary are to be held by
such Financial Intermediary for the benefit of Administrative Agent.
Each Pledgor shall, within one Business Day of actual receipt thereof,
deposit any payment received by it into a financial account that is
subject to a financial account consent agreement substantially in the
form of EXHIBIT 2 annexed hereto (each such agreement, a "FINANCIAL
ACCOUNT CONSENT AGREEMENT" and each financial account subject to a
Financial Account Consent Agreement, an "APPROVED FINANCIAL ACCOUNT")
or into the Concentration Account referred to in SUBSECTION (B) below.
In addition, all Persons that owe money to any Pledgor in excess of
$100,000 in the aggregate shall be directed to remit their payments to
an Approved Financial account. If any Pledgor is unable to obtain a
Financial Account Consent Agreement from any Financial Intermediary,
then such Pledgor shall terminate all financial accounts maintained
with such Financial Intermediary and transfer all moneys, financial
assets, checks, drafts, securities, instruments and other property
deposited therein to another Approved Financial Account. Each Pledgor
hereby represents and warrants as of the date that it is required to
comply with the covenants in this Section 9 that it does not maintain,
and will not after such date maintain, any other financial account with
any Financial Intermediary or any other banking or financial
institution other than the accounts provided to Adminstrative Agent as
of such date; PROVIDED, HOWEVER, that any Pledgor may establish and
maintain additional financial accounts with any Financial Intermediary
or any new banking or financial institution if (i) in the case of an
existing Financial Intermediary, such Pledgor, such Financial
Intermediary and Administrative Agent shall have entered into an
amendment to the relevant Financial Account Consent Agreement to
include such new Financial Account under such amendment to be in form
and substance satisfactory to Administrative Agent, and (ii) in the
case of a new banking or financial institution, (A) the applicable
Pledgor shall have given Administrative Agent 30 days' prior written
notice of its intention to establish a new financial account with a new
banking or financial institution, (B) such new banking or financial
institution shall be reasonably acceptable to Administrative Agent and
(C) such new banking or financial institution shall enter into a
Financial Account Consent Agreement. Upon compliance with the
provisions of CLAUSE (II) of the immediately preceding sentence, such
new banking or financial institution shall constitute a "FINANCIAL
Intermediary" hereunder.
(b) CONCENTRATION ACCOUNT. The Pledgors will establish a
concentration account or sub-account (the "CONCENTRATION ACCOUNT") with
Administrative Agent into which all Financial Account Collateral of the
Pledgors in excess of $1.0 million in the aggregate shall be deposited
by 12:00 p.m.
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New York time on each Business Day, subject to the provisions of
SUBSECTION 9(C). Each Pledgor hereby agrees that the Concentration
Account is under the exclusive dominion and control of Administrative
Agent and all moneys, instruments, securities and other property
received in the Concentration Account are to be held for the benefit of
Administrative Agent on behalf of the Secured Parties. Each Pledgor
hereby transfers to Administrative Agent the exclusive dominion and
control over the Concentration Account. Notwithstanding the foregoing,
Administrative Agent shall be permitted to designate a Lender that has
executed and delivered a Financial Account Consent Agreement and has
agreed to be a collateral sub-agent for Administrative Agent to be the
banking or financial institution for the Concentration Account.
(c) DISPOSITIONS FROM CONCENTRATION ACCOUNT. Until an Event of
Default shall have occurred and be continuing, each Pledgor is hereby
authorized by Administrative Agent to direct on any Business Day the
disposition of any and all moneys, financial assets, checks, drafts,
securities, instruments and other property deposited in the
Concentration Account into one or more Approved Financial Accounts for
use by such Pledgor in a manner permitted by the Credit Agreement.
Administrative Agent shall make such disposition by 2:00 p.m. New York
time on each such date.
(d) REVOCATION OF WITHDRAWAL RIGHT. Upon the occurrence and
during the continuance of any Event of Default, the authorization of
the Pledgors under SUBSECTION 9(C) shall be revoked and all deposits
maintained in the Concentration Account or with any Financial
Intermediary, and any additional moneys, financial assets, checks,
drafts, securities, instruments and other property subsequently
maintained with any Financial Intermediary, shall be transferred to a
collateral account or sub-account maintained by Administrative Agent
(or a Lender that agrees to be a collateral sub-agent for
Administrative Agent) in its name as Administrative Agent for the
Secured Parties (the "COLLATERAL Account"). All such deposits in any
such Collateral Account shall constitute "Pledged Collateral" for all
purposes of this Agreement and shall be held by Administrative Agent as
Pledged Collateral for the Secured Obligations or applied to the
payment of the Secured Obligations in accordance with SECTION 13 of
this Agreement. The costs and expenses (including attorney's fees) of
collection, whether incurred by any Pledgor or Administrative Agent (or
any sub-agent), shall be borne by the Pledgors.
(e) DEPOSITS TO COLLATERAL ACCOUNT. To the extent required by
Section 2.10(a) of the Credit Agreement, each Pledgor shall deposit
into the Collateral Account from time to time (i) the cash proceeds of
any of the Pledged Collateral or any Real Property that is subject to a
Mortgage (including pursuant to any disposition thereof), (ii) the cash
proceeds of any Casualty Event with respect to any Pledged Collateral
or any Real Property that is subject to a Mortgage (including proceeds
of casualty events and proceeds of insurance covering the Pledged
Collateral or any Real Property that is subject to a Mortgage), (iii)
any cash in respect of any Pledged Collateral which Administrative
Agent is entitled to pursuant to SUBSECTION 6(G) or SUBSECTION 7(B)
hereof and (iv) any additional amounts that such Pledgor desires to
pledge to Administrative Agent for the benefit of the Secured Parties
as additional collateral security hereunder or which such Pledgor is
required to pledge as additional collateral security hereunder pursuant
to the Credit Documents.
(f) APPLICATION OF AMOUNTS IN COLLATERAL ACCOUNT. The balance
from time to time in the Collateral Account shall constitute part of
the Pledged Collateral hereunder and shall not constitute payment of
the Secured Obligations until applied as hereinafter provided. So long
as no Event of Default has occurred and is continuing or will result
therefrom, Administrative Agent shall remit the collected balance
outstanding to the credit of the Collateral Account to or upon the
order of the respective Pledgor, in periodic installments, if
applicable, within two Business Days of (i) submission of reason-
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able evidence that such amount is to be applied as permitted by SECTION
2.10(A) of the Credit Agreement and (ii) with respect to any cash
proceeds on deposit in the Collateral Account relating to any Real
Property that is subject to a Mortgage, satisfaction of the conditions
relating thereto set forth in such Mortgage. At any time following the
occurrence and during the continuance of an Event of Default, however,
Administrative Agent may (and, if instructed by the Lenders as
specified in the Credit Agreement, shall) in its (or their) discretion
apply or cause to be applied (subject to collection) the balance from
time to time outstanding to the credit of the Collateral Account to the
payment of the Secured Obligations in the manner specified in SECTION
13 hereof subject, however, in the case of amounts deposited in the
Letter of Credit Liabilities Sub-Account, to the provisions of
SUBSECTION 9(H) hereof). The balance from time to time in the
Collateral Account shall be subject to withdrawal only as provided
herein.
(g) INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts on
deposit in the Collateral Account shall be invested from time to time
in such Cash Equivalents as the respective Pledgor (or, after the
occurrence and during the continuance of an Event of Default,
Administrative Agent) shall determine, which Cash Equivalents shall be
held in the name and be under the control of Administrative Agent (or
any sub-agent); PROVIDED, HOWEVER, that at any time after the
occurrence and during the continuance of an Event of Default,
Administrative Agent, if instructed by the Lenders pursuant to the
exercise of their remedies in accordance with Section 10 of the Credit
Agreement, shall at any time and from time to time elect to liquidate
any such Cash Equivalents and to apply or cause to be applied the
proceeds thereof to the payment of the Secured Obligations in the
manner specified in SECTION 13 hereof.
(h) COVER FOR LETTER OF CREDIT LIABILITIES. Amounts deposited
into the Collateral Account as cover for liabilities in respect of
Letters of Credit under the Credit Agreement pursuant to SECTION 2
thereof shall be held by Administrative Agent in a separate sub-account
designated as the "Letter of Credit Liabilities Sub-Account" (the
"LETTER OF CREDIT LIABILITY SUB-ACCOUNT") and, notwithstanding any
other provision of this Agreement to the contrary, all amounts held in
the Letter of Credit Liabilities Sub-Account shall constitute
collateral security FIRST for the liabilities in respect of Letters of
Credit outstanding from time to time and SECOND as collateral security
for the other Secured Obligations hereunder until such time as all
Letters of Credit shall have been terminated and all of the liabilities
in respect of Letters of Credit have been paid in full.
Section 10. TRANSFERS AND OTHER LIENS. No Pledgor shall (a)
sell, convey, assign or otherwise dispose of, or grant any option with respect
to, any of the Pledged Collateral pledged by it hereunder except as permitted by
the Credit Agreement, and (b) create or permit to exist any Lien upon or with
respect to any of the Pledged Collateral pledged by it hereunder other than (i)
Prior Liens, (ii) the Lien and security interest granted to Administrative Agent
under this Agreement and (iii) Subordinate Liens.
Section 11. REASONABLE CARE. Administrative Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession or the possession of its agents if such
Pledged Collateral is accorded treatment substantially equivalent to that which
Administrative Agent accords its own property consisting of similar instruments
or interests, it being understood that neither Administrative Agent nor any of
the Secured Parties shall have responsibility for (i) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Securities Collateral, whether or not
Administrative Agent or any other Secured Party has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral. Administrative Agent
shall also account for any monies actually received by it.
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Section 12. REMEDIES UPON DEFAULT; OBTAINING THE PLEDGED
COLLATERAL UPON EVENT OF DEFAULT.
(a) If any Event of Default shall have occurred and be
continuing and the Lenders shall have exercised their remedies in
accordance with Section 10 of the Credit Agreement, then and in every
such case, Administrative Agent may:
(i) Personally, or by agents or attorneys,
immediately take possession of the Pledged Collateral or any
part thereof, from any Pledgor or any other Person who then
has possession of any part thereof with or without notice or
process of law, and for that purpose may enter upon any
Pledgor's premises where any of the Pledged Collateral is
located, remove such Pledged Collateral, remain present at
such premises to receive copies of all communications and
remittances relating to the Pledged Collateral and use in
connection with such removal and possession any and all
services, supplies, aids and other facilities of any Pledgor;
(ii) Demand, sue for, collect or receive any money or
property at any time payable or receivable in respect of the
Pledged Collateral, including, without limitation, instructing
the obligor or obligors on any agreement, instrument or other
obligation (including, without limitation, the Receivables and
Contracts) constituting part of the Pledged Collateral to make
any payment required by the terms of such instrument or
agreement directly to Administrative Agent, and in connection
with any of the foregoing, compromising, settling, extending
the time for payment and making other modifications with
respect thereto; PROVIDED, HOWEVER, that in the event that any
such payments are made directly to any Pledgor, prior to
receipt by any such obligor of such instruction, such Pledgor
shall segregate all amounts received pursuant thereto in a
separate account and pay the same promptly to Administrative
Agent;
(iii) Sell, assign, grant a license to use or
otherwise liquidate, or direct any Pledgor to sell, assign,
grant a license to use or otherwise liquidate, any or all
investments made in whole or in part with the Pledged
Collateral or any part thereof, and take possession of the
proceeds of any such sale, assignment, license or liquidation;
(iv) Take possession of the Pledged Collateral or any
part thereof, by directing any Pledgor in writing to deliver
the same to Administrative Agent at any place or places so
designated by Administrative Agent, in which event such
Pledgor shall at its own expense: (A) forthwith cause the same
to be moved to the place or places designated by
Administrative Agent and there delivered to Administrative
Agent, (B) store and keep any Pledged Collateral so delivered
to Administrative Agent at such place or places pending
further action by Administrative Agent; and (C) while the
Pledged Collateral shall be so stored and kept, provide such
security and maintenance services as shall be necessary to
protect the same and to preserve and maintain them in good
condition. Each Pledgor's obligation to deliver the Pledged
Collateral is of the essence of this Agreement;
(v) Withdraw all moneys, instruments, securities and
other property in any financial account of any Pledgor for
application to the Secured Obligations as provided in SECTION
13 hereof;
(vi) Retain and apply the Distributions to the
Secured Obligations as provided in SECTION 13 hereof; and
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(vii) Exercise any and all rights as beneficial and
legal owner of the Pledged Collateral, including, without
limitation, perfecting assignment of and exercising any and
all voting, consensual and other rights and powers with
respect to any Pledged Collateral.
Upon application to a court of equity having jurisdiction,
Administrative Agent shall be entitled to a decree requiring specific
performance by any Pledgor of such obligation.
(b) REMEDIES; DISPOSITION OF THE PLEDGED COLLATERAL.
(i) Upon the occurrence and during the continuance of
any Event of Default and the exercise by the Lenders of their
remedies in accordance with Section 10 of the Credit
Agreement, Administrative Agent may from time to time exercise
in respect of the Pledged Collateral, in addition to the other
rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on
default under the UCC, and Administrative Agent may also in
its sole discretion, without notice except as specified below,
sell, assign or grant a license to use the Pledged Collateral
or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of
Administrative Agent's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and
upon such other terms as Administrative Agent may deem
commercially reasonable. Administrative Agent or any other
Secured Party or any of their respective Affiliates may be the
purchaser, licensee, assignee or recipient of any or all of
the Pledged Collateral at any such sale and shall be entitled,
for the purpose of bidding and making settlement or payment of
the purchase price for all or any portion of the Pledged
Collateral sold, assigned or licensed at such sale, to use and
apply any of the Secured Obligations owed to such Person as a
credit on account of the purchase price of any Pledged
Collateral payable by such Person at such sale. Each
purchaser, assignee, licensee or recipient at any such sale
shall acquire the property sold, assigned or licensed
absolutely free from any claim or right on the part of any
Pledgor, and each Pledgor hereby waives, to the fullest extent
permitted by law, all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future
have under any rule of law or statute now existing or
hereafter enacted. Administrative Agent shall not be obligated
to make any sale of Pledged Collateral regardless of notice of
sale having been given. Administrative Agent may adjourn any
public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was
so adjourned. Each Pledgor hereby waives, to the fullest
extent permitted by law, any claims against Administrative
Agent arising by reason of the fact that the price at which
any Pledged Collateral may have been sold, assigned or
licensed at such a private sale was less than the price which
might have been obtained at a public sale, even if
Administrative Agent accepts the first offer received and does
not offer such Pledged Collateral to more than one offeree.
(ii) Each Pledgor acknowledges and agrees that, to
the extent notice of sale shall be required by law, ten days'
notice to such Pledgor of the time and place of any public
sale or of the time after which any private sale or other
intended disposition is to take place shall be commercially
reasonable notification of such matters. No notification need
be given to any Pledgor if it has signed, after the occurrence
of an Event of Default, a statement renouncing or modifying
any right to notification of sale or other intended
disposition.
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(c) WAIVER OF NOTICE AND CLAIMS. Each Pledgor hereby waives,
to the fullest extent permitted by applicable law, notice or judicial
hearing in connection with Administrative Agent's taking possession or
Administrative Agent's disposition of any of the Pledged Collateral,
including, without limitation, any and all prior notice and hearing for
any prejudgment remedy or remedies and any such right which such
Pledgor would otherwise have under law, and each Pledgor hereby further
waives, to the fullest extent permitted by applicable law: (i) all
damages occasioned by such taking of possession, (ii) all other
requirements as to the time, place and terms of sale or other
requirements with respect to the enforcement of Administrative Agent's
rights hereunder, and (iii) all rights of redemption, appraisal,
valuation, stay, extension or moratorium now or hereafter in force
under any applicable law. Administrative Agent shall not be liable for
any incorrect or improper payment made pursuant to this SECTION 12 in
the absence of gross negligence or willful misconduct. Any sale of, or
the grant of options to purchase, or any other realization upon, any
Pledged Collateral shall operate to divest all right, title, interest,
claim and demand, either at law or in equity, of the applicable Pledgor
therein and thereto, and shall be a perpetual bar both at law and in
equity against such Pledgor and against any and all Persons claiming or
attempting to claim the Pledged Collateral so sold, optioned or
realized upon, or any part thereof, from, through or under such
Pledgor.
(d) CERTAIN SALES OF PLEDGED COLLATERAL. Each Pledgor
recognizes that, by reason of certain prohibitions contained in law,
rules, regulations or orders of any foreign Governmental Authority,
Administrative Agent may be compelled, with respect to any sale of all
or any part of the Pledged Collateral, to limit purchasers to those who
meet the requirements of such foreign Governmental Authority. Each
Pledgor acknowledges that any such sales may be at prices and on terms
less favorable to Administrative Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such
circumstances, agrees that any such restricted sale shall be deemed to
have been made in a commercially reasonable manner and that, except as
may be required by applicable law, Administrative Agent shall have no
obligation to engage in public sales.
(e) Each Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and applicable state securities laws, Administrative
Agent may be compelled, with respect to any sale of all or any part of
the Securities Collateral, to limit purchasers to Persons who will
agree, among other things, to acquire such Securities Collateral for
their own account, for investment and not with a view to the
distribution or resale thereof. Each Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to
Administrative Agent than those obtainable through a public sale
without such restrictions (including, without limitation, a public
offering made pursuant to a registration statement under the Securities
Act), and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially
reasonable manner and that Administrative Agent shall have no
obligation to engage in public sales and no obligation to delay the
sale of any Securities Collateral for the period of time necessary to
permit the issuer thereof to register it for a form of public sale
requiring registration under the Securities Act or under applicable
state securities laws, even if such issuer would agree to do so.
(f) Notwithstanding the foregoing, each Pledgor shall, upon
the occurrence and during the continuance of any Event of Default, at
the request of Administrative Agent, for the benefit of Administrative
Agent, cause any registration, qualification under or compliance with
any federal or state securities law or laws to be effected with respect
to all or any part of the Securities Collateral as soon as practicable
and at the sole cost and expense of the Pledgors. Each Pledgor will use
its best efforts to cause such registration to be effected (and be kept
effective) and will use its best efforts to cause such
<PAGE>
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qualification and compliance to be effected (and be kept effective) as
may be so requested and as would permit or facilitate the sale and
distribution of such Securities Collateral, including, without
limitation, registration under the Securities Act (or any similar
statute then in effect), appropriate qualifications under applicable
blue sky or other state securities laws and appropriate compliance with
any other government requirements. Each Pledgor shall cause
Administrative Agent to be kept advised in writing as to the progress
of each such registration, qualification or compliance and as to the
completion thereof, shall furnish to Administrative Agent such number
of prospectuses, offering circulars or other documents incident thereto
as Administrative Agent from time to time may request, and shall
indemnify and shall cause the issuer of the Securities Collateral to
indemnify Administrative Agent and all others participating in the
distribution of such Securities Collateral against all claims, losses,
damages and liabilities caused by any untrue statement (or alleged
untrue statement) of a material fact contained therein (or in any
related registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related
registration statement, notification or the like) a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(g) If Administrative Agent determines to exercise its right
to sell any or all of the Securities Collateral, upon written request,
the applicable Pledgor shall from time to time furnish to
Administrative Agent all such information as Administrative Agent may
request in order to determine the number of securities included in the
Securities Collateral which may be sold by Administrative Agent as
exempt transactions under the Securities Act and the rules of the
Securities and Exchange Commission thereunder, as the same are from
time to time in effect.
Section 13. APPLICATION OF PROCEEDS. The proceeds received by
Administrative Agent in respect of any sale of, collection from or other
realization upon all or any part of the Pledged Collateral pursuant to the
exercise by Administrative Agent of its remedies as a secured creditor as
provided in SECTION 12 hereof shall be applied, together with any other sums
then held by Administrative Agent pursuant to this Agreement, promptly by
Administrative Agent as follows:
FIRST, to the payment of all costs and expenses, fees,
commissions and taxes of such sale, collection or other realization,
including, without limitation, of Administrative Agent and its agents
and counsel, and all expenses, liabilities and advances made or
incurred by Administrative Agent in connection therewith, together with
interest on each such amount from the date that is one Business Day
after the date that Administrative Agent notifies the Pledgors in
writing of the incurrence of such amount until the date of payment at
the highest rate then in effect under the Credit Agreement;
SECOND, to the payment of all other costs and expenses of such
sale, collection or other realization, including, without limitation,
of the Lenders and their agents and counsel and all costs, liabilities
and advances made or incurred by the Lenders in connection therewith,
together with interest on each such amount from the date that is one
Business Day after the date that Administrative Agent notifies the
Pledgors in writing of the incurrence of such amount until the date of
payment at the highest rate then in effect under the Credit Agreement;
THIRD, without duplication of amounts applied pursuant to
CLAUSES FIRST and SECOND above, to the payment in full in cash, PRO
RATA, of (i) interest, principal and other amounts constituting Secured
Obligations (other than Swap Obligations) in accordance with the terms
of the Credit Agreement and (ii) the Swap Obligations in accordance
with the terms of the Swap Contracts; and
<PAGE>
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FOURTH, the balance, if any, to the Person lawfully entitled
thereto (including the Pledgors or their respective successors or
assigns).
In the event that any such proceeds are insufficient to pay in
full the items described in CLAUSES FIRST through THIRD of this SECTION 13, the
Pledgors shall remain liable for any deficiency.
Section 14. EXPENSES. Each Pledgor will upon demand pay to
Administrative Agent the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and the reasonable fees and
expenses of any experts and agents which Administrative Agent may incur in
connection with (a) the collection of the Secured Obligations, (b) the
enforcement and administration of this Agreement, (c) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (d) the exercise or enforcement of any of the rights
of Administrative Agent or any Secured Party hereunder or (e) the failure by any
Pledgor to perform or observe any of the provisions hereof. All amounts payable
by any Pledgor under this SECTION 14 shall be due upon demand, with interest at
the highest rate then in effect under the Credit Agreement from the date that is
one Business Day after the date that Administrative Agent notifies the Pledgors
in writing of the incurrence of such amount until the date of payment . Each
Pledgor's obligations under this SECTION 14 shall survive the termination of
this Agreement and the discharge of such Pledgor's other obligations hereunder.
Section 15. NO WAIVER; CUMULATIVE REMEDIES.
(a) No failure on the part of Administrative Agent to
exercise, no course of dealing with respect to, and no delay on the
part of Administrative Agent in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other
right, power or remedy; nor shall Administrative Agent be required to
look first to, enforce or exhaust any other security, collateral or
guaranties. The remedies herein provided are cumulative and are not
exclusive of any remedies provided by law.
(b) In the event that Administrative Agent shall have
instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or
shall have been determined adversely to Administrative Agent, then and
in every such case, the Pledgors, Administrative Agent and each other
Secured Party shall be restored to their respective former positions
and rights hereunder with respect to the Pledged Collateral, and all
rights, remedies and powers of Administrative Agent and the other
Secured Parties shall continue as if no such proceeding had been
instituted.
Section 16. ADMINISTRATIVE AGENT. Administrative Agent has
been appointed as Administrative Agent pursuant to the Credit Agreement. The
actions of Administrative Agent hereunder are subject to the provisions of the
Credit Agreement. Administrative Agent shall have the right hereunder to make
demands, to give notices, to exercise or refrain from exercising any rights, and
to take or refrain from taking action (including, without limitation, the
release or substitution of Pledged Collateral), in accordance with this
Agreement and the Credit Agreement. Administrative Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be liable for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith. Administrative Agent may resign and a successor Administrative
Agent may be appointed in the manner provided in the Credit Agreement. Upon the
acceptance of any appointment as Administrative Agent by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent under this Agree-
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ment, and the retiring Administrative Agent shall thereupon be discharged from
its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Administrative Agent.
Section 17. ADMINISTRATIVE AGENT MAY PERFORM; ADMINISTRATIVE
AGENT APPOINTED Attorney-in-Fact. If any Pledgor shall fail to do any act or
thing that it has covenanted to do hereunder or if any warranty on the part of
any Pledgor contained herein shall be breached, Administrative Agent may (but
shall not be obligated to) do the same or cause it to be done or remedy any such
breach, and may expend funds for such purpose. Each Pledgor hereby appoints
Administrative Agent its attorney-in-fact, with full authority in the place and
stead of such Pledgor and in the name of such Pledgor, or otherwise, from time
to time in Administrative Agent's discretion to take any action and to execute
any instrument consistent with the terms of this Agreement and the other Credit
Documents which Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Agreement. The foregoing grant of authority is a
power of attorney coupled with an interest and such appointment shall be
irrevocable for the term of this Agreement. Each Pledgor hereby ratifies all
that such attorney shall lawfully do or cause to be done by virtue hereof.
Section 18. [Reserved].
Section 19. MODIFICATION IN WRITING. No amendment,
modification, supplement, termination or waiver of or to any provision of this
Agreement, nor consent to any departure by any Pledgor therefrom, shall be
effective unless the same shall be made in accordance with the terms of the
Credit Agreement and unless in writing and signed by Administrative Agent. Any
amendment, modification or supplement of or to any provision of this Agreement,
any waiver of any provision of this Agreement and any consent to any departure
by any Pledgor from the terms of any provision of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
made or given. Except where notice is specifically required by this Agreement or
any other Credit Document, no notice to or demand on any Pledgor in any case
shall entitle any Pledgor to any other or further notice or demand in similar or
other circumstances.
Section 20. TERMINATION; RELEASE. When all the Secured
Obligations have been paid in full and the Commitments of the Lenders to make
any Loan or to issue any Letter of Credit under the Credit Agreement shall have
expired or been sooner terminated, this Agreement shall terminate and all rights
in the Pledged Collateral shall revert to the Pledgors. Upon termination of this
Agreement or any transfer or release of Pledged Collateral in accordance with
the provisions of the Credit Agreement, Administrative Agent shall, at the sole
cost and expense of the Pledgors, forthwith assign, transfer and deliver to
Pledgor, against receipt and without recourse to or warranty by Administrative
Agent (except as to Administrative Agent's actions), such of the Pledged
Collateral to be released (in the case of a release) as may be in possession of
Administrative Agent and as shall not have been sold or otherwise applied
pursuant to the terms hereof, and, with respect to any other Pledged Collateral,
proper documents and instruments (including UCC-3 termination statements or
releases) acknowledging the termination of this Agreement or the release of such
Pledged Collateral, as the case may be. A Pledgor shall be automatically
released from it obligations on and as of such date that such Pledgor is no
longer a Guarantor. Pledged Collateral comprising capital stock or other
ownership interest in a subsidiary of a Pledgor shall be automatically released
in the event that the capital stock or other ownership interest of such
subsidiary of a Pledgor shall be sold or otherwise transferred to a Qualified
Joint Venture in accordance with the terms of the Credit Agreement.
Section 21. NOTICES. Unless otherwise provided herein or in
the Credit Agreement, any notice or other communication herein required or
permitted to be given shall be given in the manner set forth in the
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Credit Agreement, as to any Pledgor, addressed to it at the address of Borrower
set forth in the Credit Agreement and as to Administrative Agent, addressed to
it at the address set forth in the Credit Agreement, or in each case at such
other address as shall be designated by such party in a written notice to the
other party complying as to delivery with the terms of this SECTION 21;
PROVIDED, HOWEVER, that notices to Administrative Agent shall not be effective
until received by Administrative Agent.
Section 22. CONTINUING SECURITY INTEREST; ASSIGNMENT. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) be binding upon the Pledgors, their respective successors and
assigns and (ii) inure, together with the rights and remedies of Administrative
Agent hereunder, to the benefit of Administrative Agent and the other Secured
Parties and each of their respective successors, transferees and assigns. No
other Persons (including, without limitation, any other creditor of any Pledgor)
shall have any interest herein or any right or benefit with respect hereto.
Without limiting the generality of the foregoing clause (ii), any Lender may
assign or otherwise transfer any indebtedness held by it secured by this
Agreement to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Lender, herein
or otherwise, subject however, to the provisions of the Credit Agreement and any
applicable Swap Contract. Each Affiliate of Borrower which from time to time
after the initial date of this Agreement is required under the Credit Agreement
to pledge any assets to Administrative Agent for the benefit of the Secured
Parties may become a party hereto upon execution and delivery to Administrative
Agent of a joinder agreement substantially in the form attached hereto as
EXHIBIT 4, and upon such execution and delivery shall be deemed to be a
"GUARANTOR" and a "PLEDGOR" for all purposes hereunder.
Section 23. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR PLEDGED COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
Section 24. CONSENT TO JURISDICTION AND SERVICE OF PROCESS;
WAIVER OF JURY TRIAL. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR WITH
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF
NEW YORK SITTING IN NEW YORK COUNTY, THE COURTS OF THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS OF ANY THEREOF, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PLEDGOR ACCEPTS FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH
PLEDGOR AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY
MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY
SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS SET FORTH IN
THE CREDIT AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH ADMINISTRATIVE AGENT
SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT APPOINTED BY ANY
ASSIGNOR REFUSES TO ACCEPT SERVICE, SUCH ASSIGNOR HEREBY AGREES THAT SERVICE
UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT OF ADMINISTRATIVE AGENT TO BRING PROCEEDINGS AGAINST ANY PLEDGOR IN
THE COURTS OF ANY OTHER JURISDICTION. EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
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OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 25. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 26. EXECUTION IN COUNTERPARTS. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same agreement.
Section 27. HEADINGS. The Section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
Section 28. OBLIGATIONS ABSOLUTE. All obligations of each
Pledgor hereunder shall be absolute and unconditional irrespective of:
(a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any Pledgor or
any other Obligor;
(b) any lack of validity or enforceability of the Credit
Agreement, any Secured Swap Contract, any Letter of Credit or any other
Credit Document, or any other agreement or instrument relating thereto;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations, or any
other amendment or waiver of or any consent to any departure from the
Credit Agreement, any Secured Swap Contract, any Letter of Credit or
any other Credit Document, or any other agreement or instrument
relating thereto;
(d) any pledge, exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or consent
to any departure from any guarantee, for all or any of the Secured
Obligations;
(e) any exercise, non-exercise or waiver of any right, remedy,
power or privilege under or in respect of this Agreement, any Secured
Swap Contract or any other Credit Document except as specifically set
forth in a waiver granted pursuant to the provisions of SECTION 19
hereof; or
(f) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, any Pledgor.
Section 29. ADMINISTRATIVE AGENT'S RIGHT TO SEVER
INDEBTEDNESS.
(a) Each Pledgor acknowledges that (i) the Pledged Collateral
does not constitute the sole source of security for the payment and
performance of the Secured Obligations and that the Secured Obligations
may also be secured by other types of property of the Pledgors in other
jurisdictions (all such property, collectively, the "COLLATERAL"), (ii)
the number of such jurisdictions and the nature of the
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transaction of which this instrument is a part are such that it would
have been impracticable for the parties to allocate to each item of
Collateral a specific loan amount and to execute in respect of such
item a separate credit agreement and (iii) each Pledgor intends that
Administrative Agent have the same rights with respect to the Pledged
Collateral, in any judicial proceeding relating to the exercise of any
right or remedy hereunder or otherwise, that Administrative Agent would
have had if each item of Collateral had been pledged or encumbered
pursuant to a separate credit agreement and security instrument. In
furtherance of such intent, each Pledgor agrees to the greatest extent
permitted by law that Administrative Agent may at any time by notice
(an "ALLOCATION NOTICE") to such Pledgor after the occurrence and
during the continuance of an Event of Default allocate a portion of the
Secured Obligations (the "ALLOCATED INDEBTEDNESS") to all or a
specified portion of the Pledged Collateral and sever from the
remaining Secured Obligations the Allocated Indebtedness. From and
after the giving of an Allocation Notice with respect to any of the
Pledged Collateral, the Secured Obligations hereunder shall be limited
to the extent set forth in the Allocation Notice and (as so limited)
shall, for all purposes, be construed as a separate credit obligation
of such Pledgor unrelated to the other transactions contemplated by the
Credit Agreement, any Swap Contract, any other Credit Document or any
document related to any thereof. To the extent that the proceeds of any
judicial proceeding relating to the exercise of any right or remedy
hereunder of the Pledged Collateral shall exceed the Allocated
Indebtedness, such proceeds shall belong to such Pledgor and shall not
be available hereunder to satisfy any Secured Obligations of such
Pledgor other than the Allocated Indebtedness. In any action or
proceeding to exercise any right or remedy under this Agreement which
is commenced after the giving by Administrative Agent of an Allocation
Notice, the Allocation Notice shall be conclusive proof of the limits
of the Secured Obligations hereby secured, and such Pledgor may
introduce, by way of defense or counterclaim, evidence thereof in any
such action or proceeding. Notwithstanding any provision of this
SECTION 29, the proceeds received by Administrative Agent pursuant to
this Agreement shall be applied by Administrative Agent in accordance
with the provisions of SECTION 13 hereof.
(b) Each Pledgor hereby waives to the greatest extent
permitted under law the right to a discharge of any of the Secured
Obligations under any statute or rule of law now or hereafter in effect
which provides that the exercise of any particular right or remedy as
provided for herein (by judicial proceedings or otherwise) constitutes
the exclusive means for satisfaction of the Secured Obligations or
which makes unavailable any further judgment or any other right or
remedy provided for herein because Administrative Agent elected to
proceed with the exercise of such initial right or remedy or because of
any failure by Administrative Agent to comply with laws that prescribe
conditions to the entitlement to such subsequent judgment or the
availability of such subsequent right or remedy. In the event that,
notwithstanding the foregoing waiver, any court shall for any reason
hold that such subsequent judgment or action is not available to
Administrative Agent, no Pledgor shall (i) introduce in any other
jurisdiction any judgment so holding as a defense to enforcement
against such Pledgor of any remedy in the Credit Agreement, any Swap
Contract or any other Credit Document or (ii) seek to have such
judgment recognized or entered in any other jurisdiction, and any such
judgment shall in all events be limited in application only to the
state or jurisdiction where rendered and only with respect to the
collateral referred to in such judgment.
(c) In the event any instrument in addition to the Allocation
Notice is necessary to effectuate the provisions of this SECTION 29,
including, without limitation, any amendment to this Agreement, any
substitute promissory note or affidavit or certificate of any kind,
Administrative Agent may execute and deliver such instrument as the
attorney-in-fact of any Pledgor. Such power of attorney is coupled with
an interest and is irrevocable.
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(d) Notwithstanding anything set forth herein to the contrary,
the provisions of this SECTION 29 shall be effective only to the
maximum extent permitted by law.
Section 30. FUTURE ADVANCES. This Agreement shall secure the
payment of any amounts advanced from time to time pursuant to the Credit
Agreement.
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IN WITNESS WHEREOF, the Pledgors and Administrative Agent have
caused this Agreement to be duly executed and delivered by their duly authorized
officers as of the date first above written.
QUEST DIAGNOSTICS INCORPORATED,
as Borrower and Pledgor
By:
----------------------------------
Name:
Title:
GUARANTORS:
SBCL, Inc. (DE)
SmithKline Beecham Clinical Laboratories,
Inc. (DE)
Quest Diagnostics Incorporated (CA)
Quest Holdings Incorporated (MD)
Quest Diagnostics Incorporated (MD)
Quest Holdings Incorporated (MI)
Quest Diagnostics LLC (IL)
Quest Diagnostics Incorporated (MI)
Quest Diagnostics Incorporated (CT)
Quest Diagnostics Incorporated (MA)
Quest Diagnostics of Pennsylvania Inc. (DE)
Quest Diagnostics Incorporated (OH)
MetWest Inc. (DE)
Nichols Institute Diagnostics (CA)
DPD Holdings, Inc. (DE)
Diagnostics Reference Services Inc. (MD)
Laboratory Holding Incorporated (MA)
Quest MRL Inc. (DE)
Each as a Guarantor and Pledgor
By: /s/ Kenneth W. Freeman
Name: Kenneth W. Freeman
Title: President
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QUEST DIAGNOSTICS INVESTMENTS
INCORPORATED
QUEST DIAGNOSTICS FINANCE
INCORPORATED
Each as a Guarantor and Pledgor
By: /s/ Peter C. Fulweiler
Name: Peter C. Fulweiler
Title: President
PATHOLOGY BUILDING PARTNERSHIP, by Quest
Diagnostics Incorporated (MD), as General
Partner
As a Guarantor and Pledgor
By: /s/ Kenneth W. Freeman
Name: Kenneth W. Freeman
Title: President
<PAGE>
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BANK OF AMERICA, N.A.,
as Administrative Agent
By:
----------------------------------
Name:
Title:
