<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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): FEBRUARY 17, 1995
MONSANTO COMPANY
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OF INCORPORATION)
1-2516 43-0420020
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(COMMISSION (IRS EMPLOYER
FILE NUMBER) IDENTIFICATION NUMBER)
800 NORTH LINDBERGH BOULEVARD, ST. LOUIS, MISSOURI 63167
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(314) 694-1000
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 17, 1995, Monsanto Company ("Monsanto") purchased the
Kelco specialty chemicals division of Merck & Co., Inc., pursuant to
the terms of an Agreement of Purchase and Sale dated as of December 20,
1994, as amended by an Amendment dated as of February 15, 1995 (the
"Agreement"). Japanese assets associated with the Kelco division were
transferred to Monsanto on February 20. Kelco is the worldwide leader
in the development, application and production of alginates and
biogums. Under the terms of the Agreement, the purchase price was
$1.075 billion, subject to adjustment pursuant to the Agreement.
Monsanto paid for the acquisition with a combination of cash and
short-term debt issued in a private placement. Some or all of the
short-term debt may be refinanced with long-term debt at a future date.
Monsanto presently intends to continue operating the Kelco business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a)(b) Monsanto has determined that it is impracticable to provide
the required financial statements and pro forma financial information
at this time. Such information will be filed as an amendment to this
Form as soon as practicable, but not later than May 3, 1995.
(c) Exhibits. See the Exhibit Index attached hereto and incorporated
herein by reference.
1
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MONSANTO COMPANY
......................................
(Registrant)
By /S/ BRUCE R. SENTS
...................................
Bruce R. Sents
Vice President and Controller
(Principal Accounting Officer)
Date: February 28, 1995
2
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<TABLE>
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K.
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
1 Omitted-Inapplicable
2 1. Agreement of Purchase and Sale dated as of December 20, 1994, by and between Merck & Co., Inc. ("Merck")
and The NutraSweet Company relating to the purchase and sale of Merck's Kelco Business, plus
identification of contents of omitted schedules and exhibits and agreement to furnish supplementally a
copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.
2. Amendment, dated as of February 15, 1995, to the Agreement of Purchase and Sale dated as of December 20,
1994 between Merck & Co., Inc., a New Jersey corporation, and The NutraSweet Company, a Delaware
corporation, plus identification of contents of omitted schedules and exhibits and agreement to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon
request.
4 Omitted-Inapplicable
16 Omitted-Inapplicable
17 Omitted-Inapplicable
20 Omitted-Inapplicable
23 Omitted-Inapplicable
24 Omitted-Inapplicable
27 Omitted-Inapplicable
</TABLE>
3
<PAGE> 1
AGREEMENT OF PURCHASE AND SALE
Dated as of December 20, 1994
by and between
MERCK & CO., INC.
and
THE NUTRASWEET COMPANY
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
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Page
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<S> <C>
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II TERMS OF PURCHASE AND SALE . . . . . . . . . . . . . . . . . 9
2.01. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . 9
2.02. Assumed Liabilities.. . . . . . . . . . . . . . . . . . . . . .12
2.03. The Closing.. . . . . . . . . . . . . . . . . . . . . . . . . .16
2.04. Purchase Price and Payment. . . . . . . . . . . . . . . . . . .16
2.05. Purchase Price Adjustment.. . . . . . . . . . . . . . . . . . .16
2.06. Purchase Price Allocation . . . . . . . . . . . . . . . . . . .19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MERCK. . . . . . . . . . .19
3.01. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . .19
3.02. Organization. . . . . . . . . . . . . . . . . . . . . . . . . .20
3.03. Financial Statements. . . . . . . . . . . . . . . . . . . . . .20
3.04. Absence of Certain Changes or Events. . . . . . . . . . . . . .20
3.05. Title to and Condition of Assets. . . . . . . . . . . . . . . .21
3.06. Real Property.. . . . . . . . . . . . . . . . . . . . . . . . .21
3.07. Patents, Trademarks, Etc. . . . . . . . . . . . . . . . . . . .22
3.08. Commitments.. . . . . . . . . . . . . . . . . . . . . . . . . .23
3.09. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .23
3.10. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . .24
3.11. Corporate Power and Authority; Effect of Agreement. . . . . . .24
3.12. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . .24
3.13. Governmental and Third Party Consents.. . . . . . . . . . . . .25
3.14. Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
3.15. Undisclosed Liabilities.. . . . . . . . . . . . . . . . . . . .26
3.16. Labor Matters.. . . . . . . . . . . . . . . . . . . . . . . . .26
3.17. Environmental Matters.. . . . . . . . . . . . . . . . . . . . .27
3.18. Finders.. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
3.19. Affiliated Transactions.. . . . . . . . . . . . . . . . . . . .28
3.20. Conveyance of Assets. . . . . . . . . . . . . . . . . . . . . .28
3.21. Disclaimers.. . . . . . . . . . . . . . . . . . . . . . . . . .28
3.22. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . .28
i
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3.23. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . .28
3.24. Kelco Oil Field Group.. . . . . . . . . . . . . . . . . . . . .28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . .29
4.01. Organization. . . . . . . . . . . . . . . . . . . . . . . . . .29
4.02. Corporate Power and Authority; Effect of Agreement. . . . . . .29
4.03. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
4.04. Availability of Funds.. . . . . . . . . . . . . . . . . . . . .30
4.05. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .30
4.06. Purchase for Investment.. . . . . . . . . . . . . . . . . . . .30
4.07. Finders.. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
ARTICLE V COVENANTS OF MERCK. . . . . . . . . . . . . . . . . . . . . . .30
5.01. Cooperation by Sellers. . . . . . . . . . . . . . . . . . . . .30
5.02. Conduct of Business.. . . . . . . . . . . . . . . . . . . . . .31
5.03. Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
5.04. No Solicitation of Transactions.. . . . . . . . . . . . . . . .32
5.05. Confidentiality.. . . . . . . . . . . . . . . . . . . . . . . .33
5.06. Books and Records; Personnel. . . . . . . . . . . . . . . . . .33
5.07. Further Assurances. . . . . . . . . . . . . . . . . . . . . . .34
5.08. Real Estate Matters.. . . . . . . . . . . . . . . . . . . . . .34
5.09. Kelco Oil Field Group Inc.. . . . . . . . . . . . . . . . . . .36
5.10. Certain Technology. . . . . . . . . . . . . . . . . . . . . . .36
5.11. Danville Phase II.. . . . . . . . . . . . . . . . . . . . . . .36
ARTICLE VI COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . .36
6.01. Cooperation by Buyer. . . . . . . . . . . . . . . . . . . . . .36
6.02. Books and Records; Personnel. . . . . . . . . . . . . . . . . .37
6.03. Bonds.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
6.04. Further Assurances. . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE VII ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . .38
7.01. Excluded Assets of the Subsidiaries.. . . . . . . . . . . . . .38
7.02. Ancillary Agreements. . . . . . . . . . . . . . . . . . . . . .38
7.03. Covenant Not to Compete.. . . . . . . . . . . . . . . . . . . .40
7.04. Intercompany and Intracompany Accounts. . . . . . . . . . . . .40
7.05. Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
7.06. Agreement with Bristol-Myers Squibb Company.. . . . . . . . . .48
7.07. Secrecy Agreements. . . . . . . . . . . . . . . . . . . . . . .48
ii
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<CAPTION>
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<S> <C>
7.08. Foreign Approvals.. . . . . . . . . . . . . . . . . . . . . . .48
ARTICLE VIII CONDITIONS TO BUYER'S OBLIGATIONS. . . . . . . . . . . .48
8.01. Representations, Warranties and Covenants of Merck. . . . . . .48
8.02. No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . .49
8.03. Governmental Consents.. . . . . . . . . . . . . . . . . . . . .49
8.04. Documents.. . . . . . . . . . . . . . . . . . . . . . . . . . .49
8.05. Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . .49
ARTICLE IX CONDITIONS TO SELLERS' OBLIGATIONS . . . . . . . . . . . . .49
9.01. Representations, Warranties and Covenants of Buyer. . . . . . .49
9.02. No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . .50
9.03. Governmental Consents.. . . . . . . . . . . . . . . . . . . . .50
9.04. Documents.. . . . . . . . . . . . . . . . . . . . . . . . . . .50
9.05. Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . .50
ARTICLE X EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS . . . . . . . . .50
10.01. Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . .50
10.02. Employment. . . . . . . . . . . . . . . . . . . . . . . . . . .51
10.03. Pension Plans.. . . . . . . . . . . . . . . . . . . . . . . . .52
10.04. Severance.. . . . . . . . . . . . . . . . . . . . . . . . . . .52
10.05. Other Benefit Plans.. . . . . . . . . . . . . . . . . . . . . .52
10.06. Vacation. . . . . . . . . . . . . . . . . . . . . . . . . . . .53
10.07. Foreign Employees.. . . . . . . . . . . . . . . . . . . . . . .53
10.08. Post-Retirement Health and Life Insurance Benefits. . . . . . .54
10.09. Foreign Pension Plans.. . . . . . . . . . . . . . . . . . . . .54
ARTICLE XI TERMINATION PRIOR TO CLOSING . . . . . . . . . . . . . . . .54
11.01. Termination.. . . . . . . . . . . . . . . . . . . . . . . . . .54
11.02. Effect on Obligations.. . . . . . . . . . . . . . . . . . . . .55
ARTICLE XII INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . .55
12.01. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . .55
12.02. Indemnification by Merck. . . . . . . . . . . . . . . . . . . .56
12.03. Indemnification by Buyer. . . . . . . . . . . . . . . . . . . .56
12.04. Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
12.05. Limitations on Indemnification. . . . . . . . . . . . . . . . .58
12.06. Tax Benefits and Costs. . . . . . . . . . . . . . . . . . . . .59
12.07. Environmental Matters.. . . . . . . . . . . . . . . . . . . . .59
iii
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<CAPTION>
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<S> <C>
ARTICLE XIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . .60
13.01. Interpretive Provisions.. . . . . . . . . . . . . . . . . . . .60
13.02. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . .61
13.03. Successors and Assigns. . . . . . . . . . . . . . . . . . . . .61
13.04. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .61
13.05. Modification and Waiver.. . . . . . . . . . . . . . . . . . . .61
13.06. Bulk Transfer Laws. . . . . . . . . . . . . . . . . . . . . . .61
13.07. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .61
13.08. Third Party Beneficiaries.. . . . . . . . . . . . . . . . . . .62
13.09. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . .62
13.10. Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . .62
13.11. Public Announcements. . . . . . . . . . . . . . . . . . . . . .63
13.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .64
</TABLE>
iv
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EXHIBITS
Exhibit 2.05(c) - Current Assets
Exhibit 2.05(c) - Current Liabilities
Exhibit 7.02(a) - Contract Manufacturing Agreement
Exhibit 7.02(b) - Gelrite Supply Agreement
Exhibit 7.02(d) - Lovastatin Supply Agreement
Exhibit 7.03 - Restricted Employees
SCHEDULES
Schedule 1 - Sellers
Schedule 2 - Subsidiaries
Schedule 1.01(b) - Employees with Knowledge
Schedule 2.01(b)(vi) - Excluded Assets of the Subsidiaries
Schedule 2.01(b)(xiii) - Certain Excluded Assets
Schedule 2.02(d)(ii) - Certain Retained Liabilities
Schedule 3.01 - Capital Stock of Subsidiaries; Equity Interests of
Subsidiaries
Schedule 3.03, Part 1 - Financial Statements
Schedule 3.03, Part 2 - Liabilities not on Balance Sheet
Schedule 3.03, Part 3 - Receivables Not in Ordinary Course of Business
Schedule 3.04 - Changes to Kelco Business since September 30, 1994
Schedule 3.05 - Encumbrances
Schedule 3.06 - Real Properties
Schedule 3.07 - Proprietary Rights
Schedule 3.08 - Commitments
Schedule 3.09 - Litigation
Schedule 3.10 - Compliance with Law; Permits
Schedule 3.12 - Company Benefits Plans and Benefit Arrangements
Schedule 3.13 - Government Consents
Schedule 3.14 - Taxes
Schedule 3.15 - Undisclosed Liabilities
Schedule 3.16 - Collective Bargaining Agreements, Employment Agreements
and list of Employees
Schedule 3.17 - Environmental Matters
Schedule 3.19 - Affiliated Transactions
Schedule 3.20 - Assets used by Kelco Business which are not included in
the Assets
Schedule 5.11 - Description of Danville Phase II Programs
Schedule 6.03 - Bonds
v
<PAGE> 7
AGREEMENT OF PURCHASE AND SALE
------------------------------
This Agreement, dated as of this 20th day of December,
1994, by and between Merck & Co., Inc., a New Jersey corporation
("Merck"), and The Nutrasweet Company, a Delaware corporation
("Buyer");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Merck and certain of its Affiliates listed in
Schedule 1 (collectively, "Sellers") desire to sell to Buyer, and
Buyer and certain of its Affiliates desire to buy from Sellers,
substantially all of the assets, properties and businesses
comprising Seller's worldwide hydrocolloid specialty chemical
business, and Seller's nutraceutical and biomedical business
which is conducted through the Kelco Business, including without
limitation such business as is conducted in the United States
through Merck's Kelco Division and certain Subsidiaries of Merck
listed on Schedule 2, in Japan through MSD (Japan) Co. Ltd., in
Australia through Merck Sharp & Dohme (Australia) Pty Ltd., in
Russia through MSD IDEA, Inc., and elsewhere in the world through
certain Subsidiaries of Merck listed in Schedule 2 (the "Kelco
Business");
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements, and upon
the terms and subject to the conditions, hereinafter set forth,
the parties do hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.01. Certain Defined Terms.
---------------------
As used in this Agreement, the following terms have the
following meanings:
"Acquired Business" has the meaning given it in
-----------------
Section 7.03(a).
"Affiliate" means a person that, directly or
---------
indirectly, controls, or is controlled by, or is under common
control with, another person.
"Agreement" means this Agreement as executed on the
---------
date hereof and as amended or supplemented in accordance with the
terms hereof.
"Ancillary Document" has the meaning given it in
------------------
Section 12.01.
"Assets" has the meaning given it in Section 2.01(a).
------
<PAGE> 8
"Assumed Liabilities" has the meaning given it in
-------------------
Section 2.02(a).
"Balance Sheet" means the unaudited special purpose pro
-------------
forma combined balance sheet of the Kelco Business as of
September 30, 1994.
"Bakersfield Property" has the meaning given it in
--------------------
Section 2.01(b).
"Benefit Arrangements" has the meaning given it in
--------------------
Section 10.01.
"Bonds" means, collectively, replacement (or, if the
-----
beneficiary thereof will not permit replacement, back-up)
performance bonds, payment bonds, bid bonds and similar
instruments.
"Bonus Plans" has the meaning given it in Section
-----------
2.02(d)(iv).
"Books and Records" means the books and records of
-----------------
Sellers or of the Subsidiaries relating to periods prior to the
Closing.
"Buyer" has the meaning given it in the first paragraph
-----
of this Agreement.
"Buyer Disclosure Schedule" means the disclosure
-------------------------
schedule relating to Buyer, if any.
"Buyer's Certificate" means a certificate of Buyer,
-------------------
dated as of the Closing Date and signed by an officer of Buyer,
certifying as to the fulfillment of the conditions set forth in
Section 9.0l.
"Claim Rights" means, collectively, all causes of
------------
action, judgments, claims, deposits, prepayments, refunds, choses
in action, rights of recovery or set off, indemnity rights or
other rights (including rights arising under express or implied
warranties) relating to the Assets or the Kelco Business.
"Closing" means the closing of the transactions
-------
contemplated hereby.
"Closing Date" has the meaning given it in Section 2.03.
------------
"Closing Working Capital" means (x) the sum of all
-----------------------
Current Assets less (y) the sum of all Current Liabilities, in
each case as of the Closing Date.
"Code" means the Internal Revenue Code of 1986, as
---
amended.
"Commitments" means, collectively, all contracts and
-----------
agreements, whether written or oral (including any and all
amendments thereto), to which the Kelco Business is a party or by
which it is bound (excluding purchase orders and sales orders in
the ordinary course of business).
-2-
<PAGE> 9
"Company Benefit Plans" has the meaning given it in
---------------------
Section 10.01.
"Competing Operations" has the meaning given it in
--------------------
Section 7.03(a).
"Confidentiality Agreement" means the letter agreement
-------------------------
between Buyer and J.P. Morgan Securities Inc. dated September 27,
1994, relating to the possible sale of the Kelco Business.
"Current Assets" has the meaning given it in
--------------
Section 2.05(b).
"Current Liabilities" has the meaning given it in
-------------------
Section 2.05(b).
"CVL Business" means the comprehensive patient skin
------------
care and infection-control business carried out by Calgon Vestal
Laboratories, Inc. and its affiliates.
"Danville Option" has the meaning given it in Section 7.02.
---------------
"Determination" means a "determination" as defined by
-------------
Section 1313(a) of the Code.
"Disclosure Schedule" means the disclosure schedule
-------------------
dated as of the date of this Agreement delivered to Buyer by
Merck in connection with this Agreement.
"Disputed Items" has the meaning given it in
--------------
Section 2.05(c).
"Employees" has the meaning given it in Section 10.01.
---------
"Encumbrances" means liens, charges, claims, security
------------
interests or other encumbrances.
"Environmental Laws" means all federal, state, local
------------------
and foreign statutes, laws, rules, regulations and ordinances,
and all applicable judicial and administrative orders and
decrees, relating to Environmental Matters, and all common law
providing for any remedy or right of recovery with respect to any
Environmental Matters.
"Environmental Matters" means any matter arising out of
---------------------
or relating to health and safety, or pollution or protection of
the environment or workplace, including, without limitation, any
of the foregoing relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal,
distribution, discharge, release, control or cleanup of any
Hazardous Materials.
"Environmental Permits" means all Permits required
---------------------
pursuant to applicable Environmental Laws currently in effect for
the occupation of any of the properties of, or the operation of,
the Kelco Business.
-3-
<PAGE> 10
"Excluded Assets" has the meaning given it in Section 2.01(b).
---------------
"Final Closing Working Capital" has the meaning given
-----------------------------
it in Section 2.05(e).
"Final Closing Working Capital Schedule" means the
--------------------------------------
schedule as determined in accordance with Section 2.05(c) or (d),
as the case may be.
"Final FASB No. 106 Accrual" has the meaning given it
--------------------------
in Section 2.05(b).
"Financial Statements" has the meaning given it in
--------------------
Section 3.03.
"Foreign Benefit Plans" has the meaning given it in
---------------------
Section 10.01.
"Foreign Employees" has the meaning given it in Section 10.07.
-----------------
"French Pension Plan" has the meaning given it in
-------------------
Section 2.01(b)(viii).
"GAAP" means generally accepted accounting principles
----
in the United States.
"German Pension Plan" has the meaning given it in
-------------------
Section 2.01(b)(viii).
"Government Antitrust Authority" has the meaning given
------------------------------
it in Section 6.01.
"Governmental Authority" means any government, any
----------------------
governmental entity, department, commission, board, agency or
instrumentality, and any court, tribunal or judicial or arbitral
body, whether federal, state, local or foreign.
"Hazardous Materials" means, collectively, any material
-------------------
defined as, or considered to be, a "hazardous waste," "hazardous
substance," pollutant or contaminant under any Environmental Law
including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act (42 U.S.C. Section 9601
et. seq.) and/or the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et. seq.).
"HSR Act" means the Hart-Scott-Rodino Antitrust
-------
Improvements Act of 1976, as amended.
"Income Taxes" means federal, state, local or foreign
------------
income or franchise taxes or other taxes measured in whole or in
part by income together with any interest or penalties or
additions to tax imposed with respect thereto.
"Indemnified Party" has the meaning given it in
-----------------
Section 12.04.
"Indemnifying Party" has the meaning given it in
------------------
Section 12.04.
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"Inventory" means, collectively, all raw materials,
---------
inventories, including inventories of work in process and
inventories held by customers on a consignment basis or by toll
manufacturers, stores and supplies of the Kelco Business.
"IRS" means the Internal Revenue Service.
---
"Kelco Business" has the meaning given it in the
--------------
recital to this Agreement.
"Kelco Business Intracompany Accounts" means all
------------------------------------
intercompany claims and accounts among and between business units
of the Kelco Business outstanding at the Closing that are claims
and obligations of one business unit of the Kelco Business
against another business unit of the Kelco Business.
"Kelco Oil Field Group" means Kelco Oil Field Group
---------------------
Inc., a Delaware corporation.
"Knowledge" in any given context means with respect to
---------
Sellers, the actual knowledge of the individuals set forth on
Schedule 1.01(b), in each case after reasonable investigation,
unless otherwise expressly specified.
"Lease" means each lease, sublease or license of Leased
-----
U.S. Real Property or Leased Foreign Real Property.
"Leased Foreign Real Property" means, collectively, all
----------------------------
real property located outside the United States leased, subleased
or licensed by the Kelco Business as set forth in the Disclosure
Schedule.
"Leased U.S. Real Property" means, collectively, all
-------------------------
real property located within the United States, leased,
subleased or licensed by the Kelco Business as set forth in the
Disclosure Schedule.
"Litigation" means any suit, action or proceeding in
----------
any court or before any governmental authority.
"Loss" or "Losses" shall mean each and all of the
---- ------
following items to the extent actually incurred: claims, losses,
liabilities, damages, judgments, fines, penalties, amounts paid
in settlement and reasonable costs and expenses incurred in
connection therewith (including, without limitation, interest
which is imposed in connection therewith, costs and expenses of
suits and proceedings, and reasonable fees and disbursements of
counsel). Losses shall exclude any and all consequential,
punitive, exemplary and duplicative damages.
"Material Adverse Effect" means a material adverse
-----------------------
effect on the assets, financial condition, operating results or
business of the Kelco Business taken as a whole,
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<PAGE> 12
except for any changes in general economic, regulatory or political
conditions or changes that affect the industry in which the Kelco
Business operates generally.
"Merck" means Merck & Co., Inc., a New Jersey
-----
corporation.
"Non-Compete Covenant" means the covenants and
--------------------
agreements contained in Section 7.03.
"Other Taxes" means all Taxes which are not Income Taxes.
-----------
"Owned Foreign Real Property" means all of the real
---------------------------
property located outside of the United States owned by the Kelco
Business as set forth in the Disclosure Schedule.
"Owned U.S. Real Property" means all of the real
------------------------
property located in the United States, excluding any such
property located in Bakersfield, California, owned by the Kelco
Business as set forth in the Disclosure Schedule.
"Pension Plans" has the meaning given it in Section 10.03.
-------------
"Permits" means, collectively, all franchises,
-------
approvals, permits, licenses, orders, registrations, certificates
and variances obtained from any Governmental Authority.
"Permitted Encumbrances" means, collectively,
----------------------
(a) Encumbrances that are disclosed in the Disclosure Schedule or
that secure liabilities which are disclosed in the Disclosure
Schedule, including Encumbrances noted in all deeds listed
therein (but, in each case, only to the extent Buyer is capable
of determining from the information disclosed the extent of such
Encumbrance); (b) Encumbrances that individually or in the
aggregate do not have a Material Adverse Effect; (c) liens for
Taxes, fees, levies, duties or other governmental charges of any
kind which are not yet delinquent or are being contested in good
faith by appropriate proceedings and for which appropriate
reserves have been established in accordance with the accounting
principles utilized in preparing the Financial Statements;
(d) liens for mechanics, materialmen, laborers, employees,
suppliers or similar liens arising by operation of law in the
ordinary course of business; (e) in the case of real property,
any matters, restrictions or easements of record, and the
provisions of any federal, state or local law, ordinance or
regulation; and (f) imperfections of title or other Encumbrances;
provided, however, that nothing in clauses (b) through (f),
individually or in the aggregate would have a Material Adverse
Effect.
"Pre-Closing Tax Period" means all taxable periods of
----------------------
Sellers and the Subsidiaries ending on or before the Closing
Date.
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<PAGE> 13
"Preliminary Statement of Working Capital" means a
----------------------------------------
statement reflecting Seller's good faith estimate of the Closing
Working Capital as of the Closing Date.
"Properties" means, collectively, the Owned U.S. Real
----------
Property, the Owned Foreign Real Property, the Leased Foreign
Real Property and the Leased U.S. Real Property.
"Property Tax" means real estate and personal property
------------
taxes, sewer rents and charges and other state, county and
municipal taxes, charges and assessments relating to the Assets
or the assets of the Subsidiaries.
"Proposed Closing Working Capital Schedule" means a
-----------------------------------------
schedule setting forth Seller's calculation of (i) those Assets
constituting Current Assets and those Assumed Liabilities
constituting Current Liabilities, in each case as of the Closing
Date, and (ii) Closing Working Capital.
"Proprietary Rights" has the meaning given it in
------------------
Section 3.07. Proprietary Rights do not include the Merck
trademark, trade name or logo or any proprietary rights or
proprietary technology of the CVL Business which relate to
alginate based wound management products.
"Purchase Price" has the meaning given it in Section 2.04.
--------------
"Purchase Price Allocation" has the meaning given it in
-------------------------
Section 2.06.
"Restricted Employee" has the meaning given it in
-------------------
Section 7.03(b).
"Retained Books and Records" means, collectively, all
--------------------------
books, records, files and data to the extent arising primarily
out of or relating primarily to any of the Excluded Assets or
Retained Liabilities or to Merck policies or procedures which are
not applicable to the Kelco Business.
"Retained Liabilities" has the meaning given it in
--------------------
Section 2.02(d).
"Returns" means returns, reports and forms, including
-------
remittance advice, required to be filed with any Taxing Authority
or depository.
"San Diego NOV" has the meaning given it in Section
-------------
2.02(d)(viii).
"Sellers" has the meaning given it in the recital to
-------
this Agreement.
"Seller's Certificate" means a certificate of Merck,
--------------------
dated as of the Closing Date and signed by an officer of Merck,
certifying as to the fulfillment of the conditions set forth in
Section 8.01.
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<PAGE> 14
"Stock" means all of the issued and outstanding capital
-----
stock of the Subsidiaries.
"Straddle Period" has the meaning given it in Section 7.05(b).
---------------
"Straddle Return" has the meaning given it in Section 7.05(e).
---------------
"Subsequent Loss" has the meaning given it in Section
---------------
7.05(f)(vi).
"Subsidiaries" means the Subsidiaries listed on
------------
Schedule 2.
"Tax" or "Taxes" means any federal, state, local or
--- -----
foreign income, gross receipts, franchise, estimated, alternative
minimum, add-on minimum, sales, use, transfer, registration,
value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, customs, duties, real
property, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other
withholding, or other tax, of any kind whatsoever, and including
any interest, penalties or additions to tax and any reference to
a "Tax refund" or "refund of Taxes" shall include any interest
attributable thereto.
"Tax Benefit" means the amount that any item of loss,
-----------
deduction or credit (or any other item) decreases Taxes paid or
payable including any interest with respect thereto or interest
that would have been payable but for such item net of any Tax
imposed on such interest.
"Tax Detriment" means the amount that any item of
-------------
income or gain (or any other item) increases Taxes paid or
payable including any interest with respect thereto.
"Taxing Authority" means any governmental authority,
----------------
domestic or foreign, having jurisdiction over the assessment,
determination, collection, or other imposition of Tax.
"Third Party Claims" has the meaning given it in
------------------
Section 12.04.
"Transfer Documents" means, collectively, duly executed
------------------
instruments of transfer and assignment of the Assets (including
deeds for the Owned U.S. Real Property) in form reasonably
satisfactory to Buyer and Sellers, subject only to Permitted
Encumbrances, sufficient to vest in Buyer the interests in the
Assets to be conveyed at the Closing in accordance with the terms
of this Agreement.
"U.K. Pension Plan" has the meaning given it in Section
-----------------
2.01(b)(viii).
"Union Employees" has the meaning given it in Section 10.01.
---------------
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<PAGE> 15
"United States" means the United States of America, all
-------------
of the States thereof, the District of Columbia and all
possessions and territories of the United States of America,
including, without limitation, the Commonwealth of Puerto Rico.
ARTICLE II
TERMS OF PURCHASE AND SALE
--------------------------
2.01. Purchase and Sale. (a) At the Closing, on the
-----------------
terms and subject to the conditions set forth in this Agreement,
(i) Merck shall sell or cause Sellers to sell, convey, transfer,
assign and deliver the Stock owned by them, to Buyer and Buyer
shall purchase and acquire the Stock and (ii) Merck shall sell,
or cause Sellers to sell, convey, transfer, assign and deliver to
Buyer, and Buyer shall purchase and acquire from Sellers, all of
Sellers' (including indirectly the Subsidiaries') right, title
and interest in and to the assets, properties and businesses
used, or intended for use by Merck and the Kelco Business, in the
Kelco Business (except as provided in Section 2.01(b)), as the
same may exist on the Closing Date, and whether real, personal,
tangible, intangible or mixed and whether or not reflected in the
books or records of the Kelco Business or the Subsidiaries
(collectively, the "Assets"). The Assets shall include, but not
be limited to, all of Sellers' right, title and interest in and
to the following, as the same may exist on the Closing Date:
(i) the Properties, and all tangible assets and
property related to the Kelco Business located on the
Properties;
(ii) all machinery, equipment, vehicles, fixtures,
office furniture, tools and other tangible property of
the Kelco Business;
(iii) all Inventory;
(iv) all accounts and notes receivable of the
Kelco Business (whether or not invoices have been
issued) other than intercompany receivables referred to
in Sections 7.04(b) and 7.04(c);
(v) subject to Section 5.01(b), all Commitments
and Permits of the Kelco Business;
(vi) all other sales and promotional literature
and all books, records, files and data (including
customer and supplier lists), or copies thereof, to the
extent pertaining to the Kelco Business, except for
personnel records and files, copies of which will be
provided to Buyer to the extent permitted by law;
(vii) subject to Section 5.10, all Proprietary
Rights, including, without limitation the license
granted to the Kelco Business pursuant to
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<PAGE> 16
Section 5.10 hereof, and also Sellers' rights to damages
for past, present or future infringements with respect
thereto;
(viii) except as set forth in Section 2.01(b), all
Claim Rights relating to the Assets or the Kelco
Business;
(ix) all prepaid expenses, advances and deposits
with or paid to third parties primarily relating to the
Assets or the Kelco Business;
(x) all Kelco Business Intracompany Accounts to
the extent they constitute assets;
(xi) all goodwill of Sellers associated with the
Kelco Business as a going concern;
(xii) the Danville Option, provided that, except as
--------
set forth in Section 5.10, the Proprietary Rights
associated with Merck's Danville, Pennsylvania facility
and existing on the Closing Date shall be transferred
on the Closing Date to Buyer as part of the Assets; and
(xiii) all other assets and properties of whatever
nature reflected on the Balance Sheet (to the extent
not disposed of since the date thereof).
(b) Notwithstanding anything in this Agreement to
the contrary, specifically excluded from the Assets and from the
assets of the Subsidiaries being indirectly acquired through the
acquisition of the Stock (and if any of the following is held by
any Subsidiary, such Subsidiary shall convey the same to Sellers
or to Sellers' designee prior to the Closing Date), are the
following (collectively, the "Excluded Assets"):
(i) all cash, short term investments and cash
equivalents (with the exception of petty cash of the
Kelco Business and any residual cash remaining in the
bank accounts of any of the Subsidiaries as of the
Closing Date, as referred to in Exhibit 2.05(b));
(ii) all insurance policies and any rights
thereunder;
(iii) security bonds;
(iv) all prepaid expenses, advances or deposits to
the extent relating to any of the Excluded Assets or
Retained Liabilities;
(v) all Retained Books and Records;
(vi) all assets owned by any of the Subsidiaries
that are identified on Schedule 2.01(b)(vi) hereto;
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<PAGE> 17
(vii) all Claim Rights to the extent arising out of
or relating to any of the Excluded Assets or Retained
Liabilities;
(viii) any assets of the Pension Plans, but not the
Kelco International Pension Plan (the "U.K. Pension
Plan"), the Employee Benefit Plan for Kelco
International GmbH (the "German Pension Plan") and the
pension scheme applicable to Employees in France (the
"French Pension Plan");
(ix) all accounts between the Kelco Business
(other than the Subsidiaries), on the one hand, and
Merck and its Affiliates on the other hand, that are
not Kelco Business Intracompany Accounts, to the extent
such accounts are assets of Merck or its Affiliates;
(x) all refunds, credits or overpayments with
respect to Taxes paid or accrued by Sellers and all
other payments or deposits made by Sellers in respect
of Taxes in excess of the amount of Sellers' liability
therefor;
(xi) Kelco Oil Field Group and the real property
of the Kelco Business located in Bakersfield,
California (the "Bakersfield Property") and the
personal property located thereon;
(xii) all proprietary rights and proprietary
technology of the CVL Business with respect to alginate
based wound management products; and
(xiii) any other assets set forth as "Excluded
Assets" on Schedule 2.01(b)(xiii).
(c) At the Closing (provided, that registration
and recording of patents and trademarks will occur as soon
thereafter as reasonably practical), (i) Merck shall, or shall
cause Sellers to, deliver to Buyer (x) duly executed Transfer
Documents, in form reasonably satisfactory to Buyer and Sellers,
and (y) certificates representing the Stock, duly endorsed in
blank for transfer or accompanied by duly executed stock powers
assigning the Stock in blank; and (ii) Buyer shall deliver to
Sellers duly executed instruments of assumption evidencing the
assumption by it of the Assumed Liabilities in form reasonably
satisfactory to Buyer and Merck. Sellers shall pay any
documentary, stamp, sales, excise, transfer or other Taxes or
recording fees payable (including without limitation any Income
Taxes payable by Sellers) in respect of the sale of the Assets
and the Stock.
(d) Subject to the exclusions contained in
Section 2.01(b) and 2.02(d) and as otherwise expressly provided
herein, Buyer will acquire all of the assets and assume all of
the liabilities of the Kelco Business directly pursuant to this
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<PAGE> 18
Agreement. In addition, Buyer will acquire the remaining assets
and assume the remaining liabilities of the Kelco Business (those
of the Subsidiaries) through the acquisition of the Stock of the
Subsidiaries.
2.02. Assumed Liabilities. (a) At the Closing,
-------------------
except to the extent set forth in paragraph (d) below, Buyer
shall assume the following liabilities and obligations of the
Kelco Business, (the "Assumed Liabilities"):
(i) all liabilities and obligations under or
primarily related to the Commitments, the Permits and
other intangible property to the extent included in the
Assets;
(ii) all (a) liabilities and obligations to the
extent relating to the acquisition, ownership or use of
any of the Assets after the Closing, (b) Litigation
relating to the Kelco Business, except as provided in
Section 2.02(d)(vi), and (c) subject to Section
7.05(k), Property Taxes with respect to the current
fiscal period;
(iii) all liabilities and obligations which are
included as liabilities on the Final Closing Working
Capital Schedule and all liabilities set forth on the
Disclosure Schedule;
(iv) subject to Section 2.02(d)(viii) and Section
12.07, all liabilities and obligations relating to or
arising out of Environmental Matters in respect of the
Kelco Business arising directly or indirectly from
acts, omissions, conditions, releases, including,
without limitation, the presence of Hazardous
Materials, on or prior to the Closing Date, at the
Properties;
(v) all accounts payable to third parties and
accrued liabilities which relate to the Kelco Business,
including without limitation, all accrued liabilities
for salaries and compensated absences for employees of
the Kelco Business;
(vi) all Kelco Business Intracompany Accounts, to
the extent they constitute liabilities;
(vii) all post-Closing liabilities and obligations
arising out of or relating to the collective bargaining
agreement between the Kelco Business and (A) the IUOE-
Local 501 and (B) the IAM-Local 50;
(viii) all liabilities and obligations of the Kelco
Business to Employees for short-term disability
payments;
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<PAGE> 19
(ix) all liabilities and obligations to Employees
under the U.K. Pension Plan, the German Pension Plan
and the French Pension Plan; and
(x) all liabilities described in Schedule 3.03
that are not otherwise Related Liabilities.
(b) Buyer shall pay each Assumed Liability (or
reimburse Sellers therefor) on the later of the date on which
such Assumed Liability becomes due or within 14 days after any
Seller advises Buyer of the amount thereof, provided that Buyer
may dispute such Assumed Liability with the third party to whom
the Assumed Liability is owed, in good faith, by appropriate
proceedings. The grant to Buyer of such right to dispute shall
not in any way affect the obligation of Buyer pursuant to
Section 12.03(c), to indemnify Merck and its Affiliates against
Losses sustained or incurred by any of them arising out of or
relating to such Assumed Liability, including by reason of
Buyer's disputing such Assumed Liability.
(c) Except as provided in Section 12.02 and as
otherwise set forth herein, Buyer agrees that, effective upon the
Closing, Buyer shall assume and be responsible for and indemnify
Merck and its Affiliates and hold each of them harmless against
any Losses incurred or suffered by any of them arising out of any
of (i) the Assumed Liabilities, (ii) any liability or obligation
(other than the Retained Liabilities) of any of the Subsidiaries,
and (iii) any liabilities and obligations of Sellers and the
Affiliates which are included as liabilities in the Final Closing
Working Capital Schedule.
(d) Anything in this Agreement to the contrary
notwithstanding, Buyer shall not assume, and Sellers shall be
responsible for the payment (whenever payable), performance and
discharge of, and indemnify and hold harmless Buyer and its
Affiliates from and against any Loss incurred or suffered by
Buyer arising out of, the following (collectively, the "Retained
Liabilities"):
(i) any liability of Sellers for Taxes (including
those specified in Section 2.01(c)), other than (i)
those Property Taxes with respect to the current fiscal
period which shall be allocated to Buyer pursuant to
Section 7.05 (k), and (ii) Tax liabilities of the
Subsidiaries which are separately dealt with in Section
7.05;
(ii) the liabilities and obligations the
responsibility for which is expressly set forth in
Schedule 2.02(d)(ii) as being retained by Merck or any
Affiliate thereof;
(iii) all liabilities and obligations to provide
post-retirement health and life insurance benefits to
Employees and Union Employees who have (i) retired
prior to the Closing Date or (ii) not retired prior to
the Closing Date but are eligible to retire as of the
Closing Date;
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<PAGE> 20
(iv) (A) all liabilities and obligations for
payment of bonuses under the Kelco Division Annual
Incentive Plan, the Kelco Division Long Term Incentive
Plan or the Kelco Division Sales Incentive Plan and any
other similar plan or program (including individual
contracts or arrangements and retention or golden
parachute agreements) (collectively, the "Bonus
Plans"); (B) all liabilities or obligations under the
1987 and 1991 Incentive Stock Plans, the Merck & Co.,
Inc. Supplemental Retirement Plan or the Merck & Co.,
Inc. Deferral Program and any other plan or program
providing retirement, savings or deferred compensation
benefits to Employees and Union Employees (other than
Employees and Union Employees of the Subsidiaries); and
(C) all liability for medical dental, disability (other
than short-term disability), life insurance, severance
and any other welfare benefits incurred prior to the
Closing Date but not paid prior to the Closing Date
(for purposes of this clause (iv), a liability shall be
deemed to have been incurred upon the incurrence of a
qualified expense for which, if required under the
terms of the applicable plan, reimbursement or payment
is sought either prior to or after the Closing Date);
(v) all accounts between the Kelco Business
(other than the Subsidiaries), on the one hand, and
Merck and its Affiliates, on the other hand, that are
not Kelco Business Intracompany Accounts, to the extent
such accounts are liabilities of Merck and its
Affiliates;
(vi) all liabilities and obligations relating to
all claims and Litigation involving Employees or former
Employees of the Kelco Business arising out of
incidents or events occurring prior to Closing, whether
or not such claims are reported or such Litigation is
initiated as of the Closing Date (including, without
limitation, all workers' compensation and unemployment
compensation claims);
(vii) all liabilities and obligations against which
Merck has indemnified Buyer pursuant to Section 12.02
to the extent of such indemnification;
(viii) (A) all monetary amounts in the form of fines
or penalties payable to any Governmental Authority, and
reasonable and necessary attorney's fees and filing
fees, relating directly thereto, to the extent arising
from acts, omissions, conditions, releases, or the
presence of Hazardous Materials, or violations of
Environmental Laws, on or prior to the Closing Date, at
the Properties, (B) to the extent not included in any
reserve on the Final Closing Working Capital Schedule,
any capital costs (including capital costs (it being
understood that such costs shall not include
-14-
<PAGE> 21
operations or maintenance costs) required to be incurred
by the Kelco Business to resolve violations, if any, in
existence on or prior to the Closing Date, of
Industrial User Discharge Permit #11-0062 (8/17/93) to
the extent any such violations may be detected in the
event of aqueous monitoring) required by any
Governmental Authority to be incurred by the Kelco
Business at its San Diego facilities prior to or after
the Closing Date to settle or otherwise resolve the
Finding and Notice of Violation (the "San Diego NOV"),
dated May 26, 1994, captioned "in the Matter of Kelco
Division of Merck & Co., Inc. San Diego, California,
Proceeding under Section 113(a), Clean Air Act, as
Amended," Docket No. R9-94-14, it being understood that
such costs shall not include operations or maintenance
costs; (C) any capital costs (it being understood that
such costs shall not include operations or maintenance
costs) required to be incurred by the Kelco Business to
resolve violations, if any, in existence on or prior to
the Closing Date, of 40 C.F.R. Part 414 to the extent
set forth in the finding in item I.C.7 on page 16 of
the San Diego Plant February 1994 Audit Report and
Response (2/23/94), and (D) except for any
Environmental Matters Previously Disclosed To Buyer (as
defined in Section 12.07(a)), all liabilities and
obligations relating to or arising out of off-site
waste disposal by the Kelco Business on or prior to the
Closing Date.
(ix) all liabilities and obligations relating to
or arising out of the Excluded Assets; and
(x) all liabilities and obligations which do not
arise out of or relate to the Kelco Business.
For purposes of the Assumed Liabilities and the Retained
Liabilities, whenever reference is made to any liability or
obligation, such reference shall be deemed to include any
liability or obligation pertaining thereto, whether known or
unknown, contingent or fixed, and whether pending, arising now or
hereafter.
(e) With respect to the Retained Liabilities
described in Section 2.02(d)(viii), Merck, in consultation with
Buyer, shall have the right to negotiate and plan actions taken
to settle or otherwise resolve the issues set forth in such
Section; the right but not the obligation to implement actions
taken to settle or otherwise resolve the issues set forth in
Section 2.02(d)(viii)(B) and (C); and the right to implement
actions taken to settle or otherwise resolve the issues set forth
in Section 2.02(d)(viii)(D). Buyer shall cooperate with Merck
with respect to any actions taken or costs incurred by Merck
pursuant to Section 2.02(d)(viii). Merck's obligations pursuant
to Section 2.02(d)(viii) shall be reduced to the extent any act
or failure to act by Buyer after the Closing Date
-15-
<PAGE> 22
shall cause the incurrence of, or increase the magnitude of, any cost
required to be incurred in order to resolve the San Diego NOV.
(f) Except as set forth in this Agreement,
Sellers agree that Sellers shall retain and be responsible for
and indemnify Buyer and its Affiliates and hold each of them
harmless against any Losses incurred or suffered by any of them
arising out of any of the (i) Retained Liabilities and (ii)
liabilities and obligations of Sellers and their Affiliates which
are not related to the Kelco Business.
2.03. The Closing. Subject to the terms and
-----------
conditions of this Agreement, the Closing shall take place at the
New York offices of Fried, Frank, Harris, Shriver & Jacobson,
commencing at 9:00 a.m., New York City time, on the third
business day following the satisfaction or waiver of all the
conditions set forth in Articles VIII and IX (or at such other
time and/or place and/or on such other date as the parties may
mutually agree) (the "Closing Date").
2.04. Purchase Price and Payment. The aggregate
--------------------------
purchase price to be paid by Buyer for the Assets, the Stock and
the Non-Compete Covenant (the "Purchase Price") shall be
(i) $1,075,000,000 plus (ii) the excess of the amount of the
Closing Working Capital set forth on the Preliminary Statement of
Working Capital over $105,500,000, or minus the amount by which
the amount of the Closing Working Capital as set forth on the
Preliminary Statement of Working Capital is less than
$105,500,000 and minus (iii) $15,000,000, which amount represents
the estimated amount as of the Closing Date of the FASB Statement
No. 106 accrual (accumulated postretirement benefit obligation)
for active employees who, as of the Closing Date, are ineligible
to retire under Merck's retirement plan (which accrual shall be
calculated in accordance with GAAP and as applied with respect to
Merck's post-retirement retiree medical and dental plans in
effect on the Closing Date) applicable to Buyer's Employees (as
defined in Section 10.02(b)) and Union Employees (as defined in
Section 10.05(b)). Payment of the Purchase Price shall be made
no later than 12:00 noon, New York City time, on the Closing Date
by wire transfer in immediately available funds to the account of
Seller specified by it at least two business days prior to the
Closing.
2.05. Purchase Price Adjustment. (a) Merck shall
-------------------------
prepare and, when the Closing Date is established, as soon
thereafter as practicable and at least two business days prior to
the Closing Date, deliver to Buyer the Preliminary Statement of
Working Capital.
(b) Within 30 days after the Closing Date, Merck
shall determine the final amount of the FASB Statement No. 106
accrual referred to in Section 2.04 ("Final FASB No. 106
Accrual"). If the amount of the Final FASB No. 106 Accrual is
greater than $15,000,000, Merck shall promptly pay to (or as
directed by) Buyer the amount of the difference. If the amount
of the Final FASB No. 106 Accrual is less than
-16-
<PAGE> 23
$15,000,000, Buyer shall promptly pay (or as directed by) Merck
the amount of the difference. Any such payment pursuant to this
Section 2.05(b) shall be made within 10 days of the determination of
the Final FASB No. 106 Accrual.
(c) Immediately after the Closing, Merck, with
the cooperation of Buyer, shall review those assets and
liabilities (other than Excluded Assets and Retained Liabilities)
constituting items of working capital, for the purpose of
preparing schedules (the "Proposed Closing Working Capital
Schedule") setting forth its calculation of (i) those Assets
constituting current assets (the "Current Assets") and those
Assumed Liabilities constituting current liabilities (the
"Current Liabilities"), in each case as of the Closing Date, and
(ii) Closing Working Capital. For purposes of this Agreement,
(a) the Proposed Closing Working Capital Schedule and the Final
Closing Working Capital Schedule shall be prepared (and Current
Assets and Current Liabilities shall be calculated) in accordance
with the accounting procedures and policies followed in preparing
the Financial Statements referred to in Section 3.03, (b) the
term "Current Assets" shall include those assets set forth on
Exhibit 2.05(c), and (c) the term "Current Liabilities" shall
include those liabilities set forth on Exhibit 2.05(c). In
addition, for purposes of this Agreement, the term "Closing
Working Capital" means (x) the sum of all Current Assets less
(y) the sum of all Current Liabilities, in each case as of the
Closing Date. Merck shall consult with Buyer in connection with
the preparation of the Proposed Closing Working Capital Schedule
and shall have access to the records and working papers of the
Kelco Business to the extent necessary to prepare the Proposed
Working Capital Schedule. As promptly as practicable, but no
later than 60 days after Closing, Merck shall deliver its
Proposed Closing Working Capital Schedule to Buyer.
(d) Within 30 days after delivery of the Proposed
Closing Working Capital Schedule, the parties shall attempt to
resolve any items or amounts of Current Assets or Current
Liabilities as to which Buyer objects (the "Disputed Items").
Any specific area of discrepancy which, in total, amounts to
$250,000 or less shall not be included as a Disputed Item. If
during such 30 day period the parties are able to resolve all
Disputed Items, the Closing Working Capital Schedule so agreed
upon shall be the "Final Closing Working Capital Schedule".
(e) If during such 30 day period any such
Disputed Items cannot be resolved, (i) those items to the extent
of the amounts agreed upon by the parties shall no longer
constitute Disputed Items and shall be conclusive for purposes of
preparing the Final Closing Working Capital Schedule and
calculation of the Closing Working Capital and (ii) the parties
shall promptly thereafter, but in no event more than 10 days
thereafter, cause an independent accounting firm of
internationally recognized standing reasonably satisfactory to
Merck and Buyer promptly to review this Agreement and the
remaining Disputed Items for purposes of resolving the remaining
Disputed Items and calculating the Closing Working Capital.
In making such calculation, such accounting firm shall make a
determination only of Disputed Items not resolved by the
parties and in the case
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<PAGE> 24
of all other items of Closing Working Capital shall use the amounts
which are agreed upon by the parties. Such accounting firm shall
deliver to Merck and Buyer, as promptly as practicable, a report
setting forth its resolution of the remaining Disputed Items and its
calculation of Closing Working Capital. Such report shall be final
and binding upon the parties hereto. The cost of such review and
report shall be borne by the party against whom the disagreement is in
greater part resolved or, if the resolution does not favor either
party, such costs shall be borne equally by Merck and Buyer. Each
party agrees not to select an accounting firm to review Disputed Items
pursuant to this Section 2.05(d) if, at the time of selection, either
Merck or Buyer or any of their respective Affiliates contemplates
retaining such accounting firm, within one year after such date,
for any substantial engagement having a purpose other than the
performance of services pursuant to this Section 2.05(e) or
management or systems consulting services.
(f) The Closing Working Capital agreed to by the
parties or as calculated by the accounting firm as set forth in
Section 2.05(d) above, as the case may be, shall be the Final
Closing Working Capital; and the Proposed Closing Working Capital
Schedules, adjusted to reflect the Final Closing Working Capital,
shall be the "Final Closing Working Capital Schedule" which shall
be conclusive for all purposes of this Agreement. The
determination of Final Closing Working Capital shall represent
the resolution of both the amount of Closing Working Capital and
the effect of Closing Working Capital on the Financial Statements
for all purposes of this Agreement, including any claims made for
indemnification pursuant to Section 12.02 hereof to the extent,
but only to the extent, of the amounts reflected in the Final
Closing Working Capital Schedule.
(g) If the amount of Final Closing Working
Capital is greater than the Preliminary Statement of Working
Capital, Buyer shall promptly pay to (or as directed by) Merck
the amount of the difference. If the amount of Final Closing
Working Capital is less than the Preliminary Statement of Working
Capital, Merck shall promptly pay to (or as directed by) Buyer
the amount of the difference. Any such payment pursuant to this
Section 2.05(g) shall be made within 10 days after (i) Buyer and
Merck agree upon the Final Closing Working Capital pursuant to
Section 2.05(d) or (ii) if Disputed Items are referred to a firm
of independent accountants pursuant to Section 2.05(d), the
delivery of the report of such firm referred to in
Section 2.05(e).
(h) Any payments pursuant to this Section 2.05
shall be made by wire transfer of immediately available funds to
such account of Buyer or Merck, as the case may be, as may be
designated by such receiving party. The amount of any payment to
be made pursuant to this Section 2.05 shall bear interest from
and including the Closing Date to but excluding the date of
payment at a rate per annum equal to the three month London
Interbank Offered Rate as published in the Wall Street Journal
for the Closing Date. Such interest shall be payable at
the same time as the payment to which it
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<PAGE> 25
relates and shall be calculated daily on the basis of a year of 365
days and the actual number of days for which due.
2.06. Purchase Price Allocation. The parties shall
-------------------------
allocate the Purchase Price and the assumption of the Assumed
Liabilities among the Assets, the Stock and the agreements
contained in Sections 7.02 and 7.03 hereof in accordance with an
appraisal to be conducted by an appraiser selected by Buyer and
reasonably acceptable to Sellers, provided that such appraisal
shall be reasonably acceptable to Sellers and Buyer. If such
appraisal is not reasonably acceptable to either party, Buyer and
Sellers shall negotiate in good faith to reach an agreement with
respect to the allocation of the Purchase Price. If Buyer and
Seller cannot reach such an agreement, such dispute shall be
resolved by prompt submission to an arbitrator, within a
reasonable time after Closing, which arbitrator shall be a "Big
Six" accounting firm acceptable to Buyer and Sellers and not
affiliated with either. The cost of such arbitration shall by
borne equally by Buyer and Sellers. Sellers and Buyer shall
report the financial accounting of the acquisition for all
federal, state, local and foreign tax purposes in a manner
consistent with such purchase price allocation (the "Purchase
Price Allocation").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERCK
---------------------------------------
Merck represents and warrants to Buyer, as of the date
hereof and as of the Closing Date (assuming that, for purposes of
restating the representations and warranties for purposes of
Article XII, there shall be deemed disclosed on the Disclosure
Schedule (a) any transaction, agreement or Commitment entered
into or effected by the Kelco Business, between the date hereof
and the Closing Date, other than in violation of the terms of
this Agreement, provided that such transactions, agreements or
Commitments do not have a Material Adverse Effect, and (b) the
termination of any agreement or Commitment on its expiration
date), as provided below.
3.01. Capitalization. The authorized capital stock
--------------
of the Subsidiaries is set forth in the Disclosure Schedule. All
of the outstanding shares of Stock are owned of record and
beneficially by the Seller set forth on the Disclosure Schedule
and are validly issued, fully paid and non-assessable. There are
no outstanding securities convertible into, exchangeable for, or
carrying the right to acquire, equity securities, or stock
appreciation rights, phantom stock or similar rights, of any of
the Subsidiaries, or subscriptions, warrants, options, rights or
other arrangements or commitments obligating any of the
Subsidiaries to issue or dispose of any of its equity securities
or any ownership interest therein. The sale and delivery of the
Stock to Buyer pursuant to Article II hereof will vest in Buyer
legal and valid title to the Stock, free and clear of all
Encumbrances (other than Encumbrances created or suffered
by Buyer). Except as set forth on the
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<PAGE> 26
Disclosure Schedule, the Subsidiaries directly or indirectly own no
equity interest in any person, corporation or other entity.
3.02. Organization. Each Subsidiary is a
------------
corporation duly organized and validly existing under the laws of
the jurisdiction of its incorporation with all requisite
corporate power and authority to carry on its business as it is
now being conducted. Each Subsidiary is duly qualified to do
business and in good standing as a foreign corporation in all
jurisdictions where the nature of the property owned or leased by
it, or the nature of the business conducted by it, makes such
qualification necessary and the absence of such qualification
would have a Material Adverse Effect. True and complete copies
of the organizational documents of each Subsidiary have
previously been delivered to Buyer.
3.03. Financial Statements. Merck has delivered to
--------------------
Buyer (a) unaudited special purpose pro forma combined balance
sheets of the Kelco Business as of September 30, 1994 (the
"Balance Sheet"), December 31, 1993 and December 31, 1992, and
(b) unaudited special purpose combined pro forma statements of
operations of the Kelco Business for the nine-month period ended
September 30, 1994 and each of the fiscal years ended
December 31, 1993 and 1992 (collectively, the "Financial
Statements"), copies of which are included in the Disclosure
Schedule. Except as set forth in the Disclosure Schedule, the
Financial Statements as (i) have been prepared in accordance with
GAAP as consistently applied by Merck, except that they do not
contain notes, and Inventory is recorded on a first-in, first-out
(FIFO) basis, and (ii) fairly present in all material respects
the financial position of the Kelco Business as of September 30,
1994, December 31, 1993 and December 31, 1992 and the results of
operations of the Kelco Business for the nine month period ended
September 30, 1994 and each of the fiscal years ended
December 31, 1993 and December 31, 1992, respectively. The
Financial Statements exclude the Excluded Assets, the Retained
Liabilities and those liabilities excluded from the balance
sheets as set forth in the Disclosure Schedule. Except as set
forth in the Disclosure Schedule, the accounts receivable
reflected on the Balance Sheet arose out of bona fide sales or
services in the ordinary course of business.
3.04. Absence of Certain Changes or Events. Except
------------------------------------
as set forth in the Disclosure Schedule or permitted by this
Agreement, since September 30, 1994, the Kelco Business has not
(a) suffered any damage, destruction or casualty loss to its
assets or properties which has had a Material Adverse Effect;
(b) incurred or discharged any obligation or liability or entered
into any other transaction except in the ordinary course of
business and except for obligations, liabilities and transactions
that would not individually or in the aggregate have a Material
Adverse Effect; (c) suffered any change in its assets, operating
results, business, financial condition or in its relationship
with its suppliers, customers, distributors, lessors, licensors,
licensees or other third parties other than changes which
individually or in the aggregate would not have a Material
Adverse Effect; (d) other than with respect to agreements for
which Buyer and the Kelco Business will have no liability after
Closing, increased the rate or terms of compensation or
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<PAGE> 27
benefits payable to or to become payable by it to its directors,
officers, or key employees or increased the rate or terms of any
bonus, pension or other employee benefit plan covering any of its
directors, officers or key employees except in each case
increases occurring in the ordinary course of business in
accordance with its customary practice (including normal periodic
performance reviews and related compensation and benefits
increases) or as required by any pre-existing Commitment which is
set forth on Schedule 3.16; (e) incurred any indebtedness for
borrowed money other than short-term debt incurred in the
ordinary course of business; (f) forgiven or canceled any
indebtedness owing to it or waived any claims or rights of
material value, in each case except in the ordinary course of
business; (g) sold, leased, licensed or otherwise disposed of any
of its material assets other than sales of Inventory in the
ordinary course of business; (h) amended or terminated any
material Commitment to which it is a party other than in the
ordinary course of business; or (i) committed pursuant to a
legally binding agreement to do any of the things set forth in
clauses (b) and (d) through (h) above.
3.05. Title to and Condition of Assets. Except as set
--------------------------------
forth in the Disclosure Schedule (none of which exceptions (other
than as disclosed pursuant to clause (a) of the definition of
Permitted Encumbrances contained herein), individually or in the
aggregate, has a Material Adverse Effect), the Kelco Business has
good and marketable title to all of the assets and properties
which it purports to own (including those reflected on the
Balance Sheet, except for assets and properties sold, consumed or
otherwise disposed of in the ordinary course of business since
the date of the Balance Sheet), in all cases free and clear of
all Encumbrances, except Permitted Encumbrances. None of the
Permitted Encumbrances set forth in (c), (d), (e) and (f) of the
definition of Permitted Encumbrances are material. The Assets
are in such physical condition and state of repair as to enable
the Kelco Business, as of the Closing Date, to conduct its
business as currently conducted without material disruption, and
the supply contracts constituting Commitments (and any
replacements thereof) shall, immediately after the Closing, in
all material respects, be valid, binding and enforceable and
adequate to supply the Kelco Business' production needs.
3.06. Real Property.
-------------
(a) Owned Properties. Schedule 3.06 sets forth a
----------------
list, of all Owned U.S. Real Property and Owned Foreign Real
Property. With respect to each such parcel of real property:
(i) such parcel is free and clear of all encumbrances, except
Permitted Encumbrances; (ii) there are no leases, subleases,
licenses, concessions, or other agreements, written or oral,
granting to any person the right of use or occupancy of any
portion of such parcel; and (iii) there are no outstanding rights
of first refusal to purchase such parcel (other than the right of
Buyer pursuant to this Agreement), or any portion thereof or
interest therein. None of such parcels has been condemned or
otherwise taken by public authority and, to Merck's knowledge, no
such condemnation or taking is threatened.
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<PAGE> 28
(b) Leased Properties. Schedule 3.06 sets forth
-----------------
a list of all of the Leases and each leased and subleased parcel
of real property in which Sellers have a leasehold or
subleasehold interest. Each of the Leases is in full force and
effect and Sellers hold a valid and existing leasehold or
subleasehold interest under each of such leases or subleases.
Sellers have delivered to Buyer complete and accurate copies of
each of the Leases described in Schedule 3.06. With respect to
each Lease listed in Schedule 3.06: (i) the Lease is legal,
valid, binding, enforceable and in full force and effect; (ii)
neither Sellers nor, to Merck's knowledge, any other party to the
Lease is in breach or default, and no event has occurred which,
with notice or lapse of time, would constitute such a breach or
default, or permit termination, modification or acceleration,
under the Lease; (iii) no party to the Lease has repudiated in
writing any provision thereof; (iv) there are no disputes, oral
agreements, or forbearance programs in effect as to the Lease;
(v) the Lease has not been modified in any respect, except to the
extent that such modifications are disclosed by the documents
delivered to Buyer; (vi) Sellers have not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest
in the Lease, except for the Permitted Encumbrances; and (vii)
except as set forth on Schedule 3.08, the Lease is fully
assignable to Buyer.
(c) Real Property Disclosure. Except as
------------------------
disclosed in Schedule 3.06, there is no real property leased or
owned by the Sellers used in the Kelco Business.
(d) Current Use. The current use of each of the
-----------
Properties does not violate in any material respect any
instrument of record or agreement affecting such Property. There
is no violation of any covenant, condition, restriction,
easement, license, agreement affecting such Properties or order
of any Governmental Authority having jurisdiction over any of the
Properties that materially affects such real property or the use
or occupancy thereof.
(e) Owned Foreign Real Property. Each parcel of
---------------------------
the Owned Foreign Real Properties is owned by a Subsidiary.
3.07. Patents, Trademarks, Etc. (a) The Disclosure
------------------------
Schedule sets forth a list, as of the date hereof, of all
material patents, trademarks, service marks, and copyrights
licensed by, registered or filed for, or primarily applicable to
the Kelco Business. "Proprietary Rights" shall mean collectively
the foregoing listed items and all other (i) patents, pending
patent applications, patent disclosures and inventions, including
any of the foregoing that were omitted from the Disclosure
Schedule due to immateriality or otherwise, (ii) trade dress,
logos, trade names, (iii) trade secrets (including know-how,
formulas, compositions, designs and confidential business
information), (iv) computer software data and documentation
(including electronic media) and (v) copies and tangible
embodiments thereof (in whatever form or medium), in each case
primarily applicable to the Kelco Business (including such of the
foregoing as is used in connection with the development or
production of Xanthan gum products manufactured at Merck's Danville,
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<PAGE> 29
Pennsylvania facility), together with all goodwill
associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of
interest therein under the laws of all jurisdictions. All
Proprietary Rights, whether or not listed on the Disclosure
Schedule shall be included in the Assets and exceptions thereto
are specifically listed on the Disclosure Schedule. Except as
disclosed in the Disclosure Schedule, to Merck's Knowledge
(i) the Kelco Business owns or possesses licenses or other valid
rights to use all Proprietary Rights, (ii) the conduct of the
Kelco Business as now being conducted does not conflict with, nor
has it been alleged to conflict with, any patents, trademarks,
trade names or copyrights or other intellectual property rights
of others, and (iii) no claim by any third party contesting the
validity, enforceability, use or ownership of any Proprietary
Rights has been made.
(b) The Disclosure Schedule sets forth all patent
oppositions and nullity actions against third party patents filed
on behalf of the Kelco Business.
3.08. Commitments. The Disclosure Schedule contains
-----------
a list of each Commitment (i) which involves payment over the
remaining term of such Commitment of more than $250,000 or
requires the Kelco Business to provide goods or services worth
more than $250,000 and which in each case is not cancelable upon
90 days' notice or less without penalty, (ii) which evidences or
provides for any indebtedness of the Kelco Business or any
Encumbrance securing such indebtedness on any of their respective
assets, (iii) which guarantees the performance, liabilities or
obligations of any other entity, (iv) which restricts the Kelco
Business from competing in any line of business, (v) which
relates to the distribution or marketing of the products of the
Kelco Business and involves payment over the remaining term of
such Commitment of more than $250,000 and is not cancelable upon
90 days' notice or less without penalty, or (vi) which is
otherwise material to the Kelco Business. Except as set forth in
the Disclosure Schedule, the Kelco Business is not in breach of
any of its Commitments, nor to the best of Merck's Knowledge is
any third party in breach thereof, in either case except for such
breaches which individually or in the aggregate would not have a
Material Adverse Effect. Except as set forth in the Disclosure
Schedule and except for purchase orders, no consents are required
for the assignment of any Commitment to Buyer. Except as set
forth in the Disclosure Schedule, true and complete copies of all
of the written Commitments listed in the Disclosure Schedule have
previously been made available to Buyer.
3.09. Litigation. Except as set forth in the
----------
Disclosure Schedule, as of the date of this Agreement, there is
no Litigation pending or, to the best of Merck's Knowledge,
threatened against the Kelco Business. The Kelco Business is not
subject to any outstanding orders, rulings, judgments or decrees.
-23-
<PAGE> 30
3.10. Compliance with Laws. Except as set forth in
--------------------
the Disclosure Schedule, to Merck's knowledge, the Kelco Business
has complied with all applicable laws, rules and regulations in
effect at the particular time and is in compliance with all
applicable laws, rules and regulations currently in effect,
except where the failure to comply therewith would not,
individually or in the aggregate, have a Material Adverse Effect.
To Merck's knowledge, the Kelco Business has all Permits
necessary for the conduct of its business as presently conducted,
except where the absence thereof individually or in the aggregate
does not have a Material Adverse Effect. Each material Permit is
listed in the Disclosure Schedule.
3.11. Corporate Power and Authority; Effect of
----------------------------------------
Agreement. (a) Merck is a corporation duly organized, validly
- ---------
existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and authority
to execute, deliver and perform this Agreement, to the extent
applicable, and to consummate the transactions contemplated
hereby.
(b) The execution, delivery and performance by
Merck of this Agreement, to the extent applicable, and the
consummation by Sellers of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on
the part of each of them.
(c) This Agreement has been duly and validly
executed and delivered by Merck and constitutes the valid and
binding obligation of each of them, enforceable against each of
them in accordance with its terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors' rights generally, and (ii) is subject to general
principles of equity.
(d) Except as set forth in the Disclosure
Schedule, the execution, delivery and performance by Merck of
this Agreement and the consummation by Sellers of the
transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, (i) violate any
provision of law, rule or regulation to which any Seller is
subject, (ii) violate any order, judgment or decree applicable to
any of Sellers or the Kelco Business, (iii) violate any provision
of the Certificate of Incorporation, the By-laws or other
organizational documents of any of the Sellers or the
Subsidiaries or (iv) violate, conflict with, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any
notice under, any loan agreement or any other contract or
agreement to which any of the Sellers or the Kelco Business is a
party, except where any such violation would not have a Material
Adverse Effect or prevent the consummation of the transactions
contemplated hereby.
3.12. Employee Benefit Plans. (a) The Disclosure
----------------------
Schedule lists all Company Benefit Plans, Benefit Arrangements
and Foreign Benefit Plans, and all
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<PAGE> 31
employment, consulting and severance agreements with any Employee.
Except as noted in the Disclosure Schedule, true and complete copies
thereof, where in writing, have previously been made available to
Buyer.
(b) With respect to each of the U.K. Pension
Plan, French Pension Plan and German Pension Plan: (i) it has
been maintained and administered in all material respects in
compliance with its terms and applicable law, including all laws
prohibiting discrimination; and (ii) there are no pending or, to
the Knowledge of Sellers, threatened claims or Litigation.
3.13. Governmental and Third Party Consents. None of
-------------------------------------
the Sellers nor the Kelco Business needs to give any notice to,
make any filing with, or obtain any authorization, consent, or
approval of any third party or governmental agency in order for
Buyer and Sellers to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions
described in Sections 2.01 and 2.02 above), except (i) for filing
and approval required under the HSR Act or other governmental
consents set forth in the Disclosure Schedule or filings and
approvals required from foreign Governmental Authorities, (ii)
for third-party consents required for the transfer of any
Commitment as set forth in the Disclosure Schedule and (iii)
where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not, individually or in
the aggregate, have a Material Adverse Effect or materially
impair the ability of Sellers to consummate the transactions
contemplated by this Agreement.
3.14. Taxes. (a) (i) Except as set forth in the
-----
Disclosure Schedule, the Subsidiaries have filed all Tax returns
and reports required to be filed in respect of Pre-Closing Tax
Periods in a timely manner (taking into account all extensions of
due dates) and all Taxes payable with respect to the Subsidiaries
for Pre-Closing Tax Periods that are due and payable have been
paid. Except as set forth in the Disclosure Schedule, no
deficiencies for any Taxes have been asserted or assessed against
the Subsidiaries which remain unpaid.
(ii) Except as set forth in the Disclosure
Schedule, none of the Subsidiaries has given any waivers of
statutes of limitations with respect to any Tax returns and
reports, which waivers are currently in effect, and no request
for any such waiver is currently pending. No requests for ruling
or determination letters or competent authority relief with
respect to any Subsidiary is pending with any taxing agency with
respect to any Taxes. The Disclosure Schedule identifies all Tax
returns and reports of the Subsidiaries with respect to which an
audit is in progress or pending.
(b) Except as set forth in the Disclosure
Schedule, the Buyer, the Subsidiaries, and the Kelco Business are
not and will not become obligated under any Commitment entered into
by any Seller, Subsidiary, or any Affiliate of any Seller prior to
-25-
<PAGE> 32
the Closing to make any payments that will be non-deductible under
Section 280G of the Code (or any corresponding provision of state,
local or foreign Tax law).
(c) All Taxes required to be withheld and paid in
connection with amounts paid or owing by any Subsidiary to any
Employee or third party have been withheld and paid.
(d) There are no Tax liens (other than for Taxes
not yet due and payable) on any of the Assets.
(e) None of the Subsidiaries has made an election
under Section 341(f).
(f) None of the Assets is property which is
required to be treated as being owned by any other person
pursuant to the so-called "safe-harbor lease" provisions of
former Section 168(f)(8).
(g) None of the Subsidiaries will be required to
include any amounts in income after the Closing (i) as a result
of a change in method of accounting for a Pre-Closing Tax Period,
(ii) as a result of any closing or other agreement entered into
with any taxing authority prior to the Closing, or (iii) as a
result of a sale of property prior to the Closing reported on the
installment method.
(h) No claim has been made by any taxing
authority in any jurisdiction where any of the Subsidiaries or
Sellers (with respect to the Kelco Business) do not file Tax
returns or reports that such corporation (or any branch or
division) is or may be subject to taxation by that jurisdiction.
(i) No Seller of any U.S. real property interest
(within the meaning of Code Section 897) pursuant to the
transactions described herein is a foreign corporation, foreign
partnership, foreign trust, or foreign estate (within the meaning
of Code Sections 897 and 1445 and the regulations thereunder).
3.15. Undisclosed Liabilities. The Kelco Business
-----------------------
did not have as of September 30, 1994 any liability or obligation
of any kind or nature (fixed or contingent) that is required to
be reflected on financial statements (including the notes
thereto) in accordance with GAAP which is not reflected, fully
reserved against or disclosed in the Financial Statements or
disclosed elsewhere in the Disclosure Schedules, other than
(i) liabilities that individually or in the aggregate would not
have a Material Adverse Effect, and (ii) Retained Liabilities.
3.16. Labor Matters. Except as set forth in the
-------------
Disclosure Schedule, the Kelco Business is not a party to any
collective bargaining agreement or any employment or consulting
agreement or any agreement, plan or arrangement providing for severance
-26-
<PAGE> 33
payments to any employee of the Kelco Business upon termination of
employment or which provide benefits upon a change in control of the
Kelco Business. Except as set forth in the Disclosure Schedule, there
is no material unfair labor practice, charge or complaint pending
against the Kelco Business arising out of its activities, nor is there
any labor strike, work stoppage, grievance or other labor dispute
pending or, to the best of Merck's Knowledge, threatened against the
Kelco Business, nor has any such labor strike, work stoppage,
grievance or other labor dispute occurred since January 1, 1990.
There is no existing representation question respecting any Employees.
The Disclosure Schedule sets forth a list of all Employees as of the
dates set forth therein.
3.17. Environmental Matters. (a) Except as set forth
---------------------
in the Disclosure Schedule and except for such of the following
as individually or in the aggregate do not have a Material
Adverse Effect:
(i) The Kelco Business, to Merck's
Knowledge, has complied with all applicable
Environmental Laws and is in compliance with all
applicable Environmental Laws currently in effect, and
the Kelco Business has not received any written notice
that it is in violation of applicable Environmental
Laws.
(ii) The Kelco Business, to Merck's
Knowledge, has obtained, and is in compliance with all
terms and conditions of, all Environmental Permits.
(b) To Merck's Knowledge, except as set forth in
the Disclosure Schedule, no Hazardous Materials have been
released or discharged by the Kelco Business into the environment
at, on or from the premises of the Kelco Business, except for any
such release or discharge that would not, individually or in the
aggregate, subject the Kelco Business to liability under any
Environmental Laws that would have a Material Adverse Effect.
(c) Buyer acknowledges that the representations
and warranties contained in this Section 3.17 are the only
representations and warranties being made with respect to
Environmental Matters, no other representation contained in this
Agreement shall apply to any Environmental Matter and no other
representation or warranty, express or implied, is being made
with respect thereto.
3.18. Finders. No broker's, finder's or any similar
-------
fee will be incurred by or on behalf of Merck or the Kelco
Business in connection with the origin, negotiation, execution or
performance of this Agreement or the transactions contemplated
hereby for which Buyer or any of its Affiliates or the Kelco
Business shall have any liability.
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<PAGE> 34
3.19. Affiliated Transactions. The Disclosure
-----------------------
Schedule sets forth a list of the nature of all transactions
(other than transactions in the ordinary course of business
effected on an arm's-length basis), including the provision of
intracompany services whether or not such services result in
overhead allocations or other charges by Merck to the Kelco
Business, between Merck and the Kelco Business in each case in
effect at any time since January 1, 1994.
3.20. Conveyance of Assets. Except as set forth in
--------------------
the Disclosure Schedule, the Assets include all assets (other
than the Excluded Assets) which are, immediately prior to the
Closing, used, or intended for use by Merck and the Kelco
Business, in the Kelco Business, in its business.
3.21. Disclaimers. EXCEPT AS SET FORTH IN THIS
-----------
ARTICLE III, MERCK MAKES NO REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED (INCLUDING THOSE REFERRED TO IN SECTION 2-312 OF THE
NEW YORK STATE UNIFORM COMMERCIAL CODE OR IN ANY STATUTE
APPLICABLE TO REAL PROPERTY), AND THE ASSETS OF THE KELCO
BUSINESS BEING TRANSFERRED TO BUYER UPON THE ACQUISITION THEREOF
BY BUYER AT THE CLOSING ARE TO BE CONVEYED HEREUNDER "AS IS WHERE
IS" ON THE CLOSING DATE, AND IN THEIR THEN PRESENT CONDITION, AND
BUYER SHALL RELY UPON ITS OWN EXAMINATION THEREOF. IN ANY EVENT,
EXCEPT AS SET FORTH IN THIS ARTICLE III, MERCK MAKES NO WARRANTY
OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR QUALITY, WITH RESPECT TO ANY OF THE ASSETS BEING SO
TRANSFERRED, OR AS TO THE CONDITION OR WORKMANSHIP THEREOF OR THE
ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT.
3.22. Subsidiaries. Since January 1, 1994, the
------------
Subsidiaries listed in Schedule 2, Kelco Oil Field Group, MSD
(Japan) Co. Ltd., Merck Sharp & Dohme (Australia) Pty Ltd. and
MSD IDEA, Inc. are the only subsidiaries of Merck through which
any business of the Kelco Business has been conducted.
3.23. Disclosure. Unless otherwise stated in a
----------
representation and warranty contained in this Article III, such
representation and warranty shall only be qualified by an item in
the Disclosure Schedule referring directly to such representation
and warranty.
3.24. Kelco Oil Field Group. The only assets of the
---------------------
Kelco Oil Field Group being transferred to Buyer pursuant to this
Agreement are (a) goodwill, including customer lists, (b) assets
reflected on the Final Closing Working Capital Schedule, (c)
inventory, (d) Proprietary Rights and (e) contracts and
Commitments which are either disclosed or not required to be
disclosed. The only liabilities of the Kelco Oil Field
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<PAGE> 35
Group being assumed by Buyer pursuant to this Agreement are (a)
obligations related to the contracts, Commitments and Proprietary
Rights referred to in the previous sentence and (b) liabilities
reflected on the Final Closing Working Capital Schedule.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Merck, as of
the date hereof and as of the Closing Date, as follows:
4.01. Organization. Buyer is a corporation duly
------------
organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite
corporate power and authority to carry on its business as it is
now being conducted, and to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby.
4.02. Corporate Power and Authority; Effect of Agreement.
--------------------------------------------------
(a) The execution, delivery and performance by Buyer of this
Agreement and the consummation by Buyer of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer.
(b) This Agreement has been duly and validly
executed and delivered by Buyer and constitutes the valid and
binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors' rights generally, and (ii) is subject to general
principles of equity.
(c) Except as set forth in the Buyer Disclosure
Schedule, the execution, delivery and performance by Buyer of
this Agreement and the consummation by Buyer of the transactions
contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (i) violate any provision
of law, rule or regulation to which Buyer is subject,
(ii) violate any order, judgment or decree applicable to Buyer,
(iii) violate any provision of the Certificate of Incorporation
or by-laws of Buyer, or (iv) violate, conflict with, constitute a
default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require
any notice under, any loan agreement or any other contract or
agreement to which Buyer is a party, except where any such
violation would not have a material adverse effect on Buyer's
ability to perform its obligations hereunder or prevent the
consummation of the transactions contemplated hereby.
4.03. Consents. No consent, approval or authorization
--------
of, or exemption by, or filing with, any governmental authority,
other than pursuant to the HSR Act and
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<PAGE> 36
any filings and approvals required from foreign Governmental
Authorities is required to be obtained by Buyer in connection with the
execution, delivery and performance by Buyer of this Agreement, or the
taking by Buyer of any other action contemplated hereby.
4.04. Availability of Funds. Buyer has sufficient
---------------------
cash and committed facilities to consummate the transactions
contemplated hereby and will have available on the Closing Date
sufficient funds in U.S. currency to enable it to consummate the
transactions contemplated by this Agreement.
4.05. Litigation. As of the date of this Agreement,
----------
there is no Litigation pending or, to Buyer's knowledge,
threatened (i) against Buyer or any of its Affiliates which is
reasonably likely to have a material adverse effect on the
ability of Buyer to perform its obligations under this Agreement,
or (ii) which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby. Neither
Buyer nor any of its Affiliates is subject to any outstanding
orders, rulings, judgments or decrees which would have a material
adverse effect on the ability of Buyer to perform its obligations
under this Agreement.
4.06. Purchase for Investment. Buyer is purchasing
-----------------------
the Stock for investment and not with a view to any public resale
or other distribution thereof in violation of any applicable
securities laws and will not sell the Stock other than in
compliance with any applicable securities laws.
4.07. Finders. No broker's, finder's or any similar
-------
fee will be incurred by or on behalf of Buyer in connection with
the origin, negotiation, execution or performance of this
Agreement or the transactions contemplated hereby for which
Seller or any of its Affiliates shall have any liability.
ARTICLE V
COVENANTS OF MERCK
------------------
Merck hereby covenants and agrees with Buyer as
follows:
5.01. Cooperation by Sellers. (a) From the date
----------------------
hereof and prior to the Closing, Sellers will use their
reasonable best efforts and will cooperate with Buyer, to
promptly secure all necessary consents, approvals,
authorizations, exemptions and waivers from third parties,
including, without limitation, under the HSR Act, as shall be
required in order to enable Sellers to promptly effect the
transactions contemplated hereby, and will otherwise use their
reasonable best efforts to cause the prompt consummation of such
transactions in accordance with the terms and conditions hereof.
(b) Notwithstanding anything herein to the
contrary, to the extent the assignment of any Commitment or
Permit included in the Assets to be assigned to
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<PAGE> 37
Buyer pursuant to the provisions hereof shall require the consent of
any other party, this Agreement shall not constitute a breach thereof
or create rights in others not desired by Buyer. If any such
consent is not obtained, Sellers shall, at Buyer's request and
expense, cooperate with Buyer in any reasonable arrangement to
provide for Buyer the benefit of any such Commitment or Permit,
including using its reasonable efforts to enforce any and all
rights of Sellers against the other party to any such Commitment
or Permit arising out of the breach or cancellation thereof by
such party or otherwise.
(c) Commencing on the Closing Date, Sellers will
cooperate with Buyer in connection with, and will provide to
Buyer, for such period as they may agree (but in no event more
than six months from Closing), such payroll and other
transitional services that Merck currently provides to the Kelco
Business to the extent Buyer may reasonably request. Buyer shall
reimburse Sellers for the actual cost of such services.
5.02. Conduct of Business. Except as may be
-------------------
otherwise contemplated by this Agreement or except as Buyer may
otherwise consent to in writing (which consent shall not be
unreasonably withheld), from the date hereof and prior to the
Closing, Merck will (i) in all material respects, operate the
Kelco Business only in the ordinary course in substantially the
manner heretofore conducted; provided, that Merck may, with
--------
Buyer's prior written consent (which consent shall not be
unreasonably withheld), contribute certain tangible real and
personal property located in California to a Subsidiary which is
a member of Merck's consolidated group for U.S. federal income
tax purposes prior to the Closing in order to sell such property
indirectly to Buyer pursuant to the sale of such Subsidiary to
Buyer pursuant to this Agreement; (ii) maintain the properties,
machinery and equipment of the Kelco Business in sufficient
operating condition and repair to enable it to operate its
business in all material respects in the manner in which the
business is currently operated, provided, however, that if any
-------- -------
facility is damaged by reason of fire, flood, earthquake, force
majeure or other acts of God and such damage would constitute a
Material Adverse Effect unless repaired (a) Merck shall not be
required to repair such facility, and, in such event, the
condition contained in Section 8.01 shall not have been satisfied
and (b) if Merck determines to repair such facility and does
repair such facility, Merck shall pay the cost of repairing such
facility and receive any insurance proceeds with respect thereto;
(iii) use reasonable efforts to continue all material existing
insurance policies (or comparable insurance, including as to
scope and amount of coverage) insuring the Kelco Business and its
assets and business in full force and effect; (iv) use reasonable
efforts to preserve the relationships of the Kelco Business with
its material suppliers, customers, distributors, lessors,
licensors, licensees and others having material business dealings
with it; (v) other than with respect to agreements for which
Buyer and the Kelco Business have no liability and will have no
liability after the Closing, not enter into any employment or
termination agreement or effect any increase in the rate or terms
of compensation payable or to become payable to directors,
officers or employees of the Kelco Business or effect any general
increase in the compensation of other employees of the Kelco
Business, or increase the rate or terms of any bonus,
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<PAGE> 38
pension or other employee benefit plan covering any of its directors,
officers or key employees except in each case increases occurring
in the ordinary course of business in accordance with its
customary practice (including normal periodic performance reviews
and related compensation and benefits increases) or as required
by any pre-existing Commitment specifically identified on the
Disclosure Schedule; (vi) not (A) incur any indebtedness for
borrowed money other than in the ordinary course of business for
which Buyer or any Subsidiary will be liable following the
Closing, other than indebtedness between members of the Kelco
Business and indebtedness incurred by any Subsidiary to settle
intercompany accounts and fund a dividend to reduce cash balances
(subject to the proviso in clause (D) below), (B) sell, lease,
license or otherwise dispose of any material asset of the Kelco
Business, other than sales of Inventory in the ordinary course of
business, (C) purchase or enter into any lease for real property
for the Kelco Business, except office leases entered into in the
ordinary course of business, (D) declare any dividend or other
distribution with respect to the capital stock of any Subsidiary
other than in cash (provided that no money shall have been
borrowed to pay such cash dividend unless any indebtedness
incurred with respect thereto is either repaid prior to the
Closing Date or reflected as a current liability on the Closing
Working Capital Schedule, and Buyer is informed of any such
indebtedness), (E) knowingly create any consensual lien or other
consensual encumbrance on any of the assets of the Kelco Business
other than Permitted Encumbrances, provided, that if an
encumbrance (other than a Permitted Encumbrance) is created on
any of such assets, Merck will use its reasonable efforts to
remove any such encumbrance, (F) forgive or cancel any
indebtedness owing to the Kelco Business or waive any claims or
rights of material value other than in the ordinary course of
business, and (G) enter into a legally binding agreement to do
any of the things set forth in this clause (vi); and (vii)
notwithstanding anything in this Section 5.02 to the contrary,
not cause or permit any unconsolidated Subsidiary to engage in
any activity (including without limitation the incurrence of
indebtedness of any nature whatsoever) outside the ordinary
course of its business.
5.03. Access. From the date hereof and prior to the
------
Closing, Merck shall to the extent permitted by law provide Buyer
with such information as Buyer may from time to time reasonably
request with respect to the Kelco Business and the transactions
contemplated by this Agreement, and shall provide Buyer and its
representatives, accountants and lenders reasonable access during
regular business hours and upon reasonable notice to the
employees, properties, books and records of the Kelco Business as
Buyer may from time to time reasonably request. Any disclosure
whatsoever during such investigation by Buyer shall not
constitute an enlargement of or additional representations or
warranties of Merck beyond those specifically set forth in this
Agreement. Until the Closing, all such information and access
shall be subject to the terms and conditions of the
Confidentiality Agreement.
5.04. No Solicitation of Transactions. Until the
-------------------------------
Closing or the prior termination of this Agreement in accordance
with its terms, Merck shall not, nor shall it
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<PAGE> 39
permit any of its officers or directors or other representatives to,
solicit or participate in discussions with, or, except as may be
legally required, provide any information to, any corporation,
partnership, person or other entity or group concerning any
merger, consolidation, recapitalization, sale of substantial
assets, sale of capital stock or similar transaction involving
the Kelco Business.
5.05. Confidentiality. If the transactions
---------------
contemplated by this Agreement are consummated, Merck and its
Affiliates will maintain the confidentiality of all information,
documents and materials relating to the Kelco Business which
remain in their possession or are obtained pursuant to
Section 6.02 (other than any of the foregoing which relates to
any Excluded Assets or Retained Liabilities), except to the
extent disclosure of any such information is authorized by Buyer
or is compelled by law or legal process or is needed by Merck or
any of its Affiliates in connection with any Retained Liabilities
or Excluded Assets or any then pending or threatened Litigation
or to enable them to comply with the provisions of this
Agreement, in any of which cases Merck shall notify Buyer of the
nature of such disclosure at least three days prior to such
disclosure, if practicable under the circumstances, and if not,
as much in advance of disclosure as practical under the
circumstances. The provisions of this Section 5.05 shall not
apply to any information, documents or material which are in or
come into the public domain other than by reason of a breach of
this Section 5.05. In the event of the breach of any of the
provisions of this Section 5.05, Buyer, in addition to other
rights and remedies existing in its favor, shall be entitled to
injunctive relief or other equitable remedies (without the
posting of a bond or other security).
5.06. Books and Records; Personnel. For a period of
----------------------------
seven years from the Closing Date:
(a) No Seller shall dispose of or destroy any of
the Retained Books and Records without first offering to turn
over possession thereof to Buyer, at Buyer's cost, by written
notice to Buyer at least 30 days prior to the proposed date of
such disposition or destruction.
(b) Sellers shall allow Buyer and its respective
agents reasonable access to all Retained Books and Records
relating to the Kelco Business in Sellers' possession and not in
Buyer's possession during normal working hours at such Seller's
principal place of business or at any location where such
Retained Books and Records are stored, and Buyer shall have the
right, at its own expense, to make copies of such Retained Books
and Records; provided, however, that any such access or copying
shall be had or done in such a manner so as not to unduly
interfere with the normal conduct of such Seller's business, and
provided further that (i) if disclosure of any information
contained in the Retained Books and Records is compelled by legal
process, and such information is not publicly available and
disclosure thereof would adversely affect such Seller, such Seller
shall have the right to contest the disclosure of such information
-33-
<PAGE> 40
(which it shall do promptly and with diligence or it shall forfeit
such right) and shall indemnify Buyer and its Affiliates and hold them
harmless against any Losses incurred by any of them by reason of the
non-disclosure of such information, and (ii) if disclosure of any such
information is not compelled by legal process, such Seller shall first
have the opportunity to require Buyer not to disclose such information
by agreeing in writing, in form and substance reasonably satisfactory
to Buyer, to assume any liability occasioning Buyer's request or
otherwise to indemnify Buyer and its Affiliates and hold them harmless
against any Losses incurred by any of them by reason of such non-
disclosure.
(c) Sellers shall make available to Buyer upon
written request (i) copies of any Retained Books and Records,
(ii) such Seller's personnel to assist Buyer in locating and
obtaining any Retained Books and Records, and (iii) any of their
personnel whose assistance or participation is reasonably
required by Buyer or any of its Affiliates in anticipation of, or
preparation for, existing or future Litigation or other matters
in which Buyer or any of its Affiliates is involved. In
addition, Sellers shall otherwise cooperate with any reasonable
request of Buyer in connection with the performance, defense or
discharge of the Assumed Liabilities. Buyer shall reimburse
Sellers for the reasonable out-of-pocket expenses incurred by
them in performing the covenants contained in this
Section 5.06(c), and Buyer shall reimburse Sellers for the
reasonable value of the time spent by such personnel in
compliance with such clause (iii) of the first sentence of this
Section 5.06(c) or the second sentence of this Section 5.06(c).
5.07. Further Assurances. At any time or from time to
------------------
time after the Closing, Sellers shall execute and deliver any
further instruments or documents and take all such further action
as Buyer may reasonably request in order to accomplish the
consummation of the transactions contemplated hereby.
5.08. Real Estate Matters. Seller agrees to use
-------------------
commercially reasonable efforts to obtain the following items
prior to the Closing or as soon thereafter as is reasonably
possible:
(a) Title Insurance. Sellers will use
---------------
commercially reasonable efforts to obtain, at their own cost and
expense, an ALTA Owners or Leasehold Policy of Title Insurance,
as the case may be, Form 1992, for each of the Properties located
in the United States (except as otherwise noted on Schedule 3.06)
and such coverage as is customarily obtained and otherwise
acceptable to the Buyer for each of the Properties located
outside of the United States (except as otherwise noted on
Schedule 3.06), issued by Stewart Title or such other title
insurer satisfactory to the Buyer (the "Title Insurer"), in such
amount as the Buyer determines to be the fair market value
(including all improvements thereon), insuring the Buyer's
interest in such parcel, subject only to the Permitted
Encumbrances. Each such commitment for a title insurance policy
will (i) insure title to the related parcels of real estate and
all recorded easements benefiting such parcel, (ii) contain an
"extended coverage endorsement" insuring over the general
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<PAGE> 41
exceptions contained customarily in such policies, (iii) contain
an endorsement insuring that the parcel described in such title
insurance policy is the parcel shown on the survey delivered with
respect to such parcel, (iv) contain an endorsement insuring that
there is direct and unencumbered pedestrian and vehicular access
to a public street from such parcel, (v) if the real estate
covered by such policy consists of more than one record parcel,
contain a "contiguity" endorsement insuring that all of the
record parcels are contiguous to one another, (vi) not include
any creditors' rights exception, provided that regulatory
requirements in the applicable jurisdiction permit such exception
to be deleted and (vii) contain a tax number endorsement and such
other endorsements (including, without limitation, a zoning
endorsement) as Buyer may reasonably request, provided the same
are customarily obtained in transactions similar to the
transaction contemplated hereby and are available at commercially
reasonable rates. Sellers shall pay for and deliver all
documents necessary for the issuance of a title policy (the
"Title Policy") in the form of each commitment and endorsement
referred to above.
(b) Surveys. Sellers shall use commercially
-------
reasonable efforts to procure, at their own cost and expense,
current surveys of each of the Properties (except as otherwise
noted on Schedule 3.06), prepared by a licensed surveyor and
conforming to 1992 ALTA/ACSM Minimum Detail Requirements for
Urban Land Title Surveys, and such standards as the Title Insurer
may require as a condition to the removal of any survey
exceptions from each Title Policy, and certified to Buyer and the
Title Insurer, in a form satisfactory to such parties. The
survey shall disclose the location of all Improvements,
easements, party walls, sidewalks, roadways, utility lines, and
such matters shown customarily on such surveys, and showing
access affirmatively to public streets and roads, and including
such items in Table A as are required to obtain the title
endorsements described in (a) above.
(c) Estoppel Letter. Sellers shall use
---------------
commercially reasonable efforts to obtain an Estoppel Letter (the
"Estoppel Letter") with respect to each parcel of Leased U.S.
Real Property and Leased Foreign Real Property listed on Schedule
3.06 from the landlords, lessors, sublessors or licensors for
such Property in form and content reasonably satisfactory to
Buyer, stating that: a copy of the Lease, attached to the
Estoppel Letter, is a true, correct and complete copy of the
lease, sublease, license or tenancy agreement and represents the
entire agreement between the landlord and the Sellers; to the
landlord's knowledge the Sellers are not in breach or default
under the Lease, and no event has occurred which would with
notice or passage of time, or both, constitute a breach or
default or permit termination, modification, or acceleration
under any such lease, tenancy agreement, license or sublease and
the landlord has not repudiated any provision of the lease,
tenancy agreements, license or sublease; all rent and other
payments owed by the tenant to the landlord have been paid to
date; to the landlord's knowledge there are no disputes, oral
agreements or forbearance agreements in effect as to the Lease;
and that the landlord consents to the assignment of the Lease.
-35-
<PAGE> 42
5.09. Kelco Oil Field Group Inc. Within 30 days
-------------------------
after the Closing Date, Merck will take all actions necessary to
effect a change in the name of Kelco Oil Field Group Inc. to a
name reasonably acceptable to Buyer.
5.10. Certain Technology. In the event that there is
------------------
Merck technology not within Proprietary Rights which, as of the
date hereof, is used or intended by Merck and the Kelco Business
for use in the Kelco Business, Merck agrees to grant and hereby
grants to Buyer a perpetual, non-exclusive, worldwide, paid-up
license under Merck's rights to the technology for Buyer to use
such technology as so used or intended for use solely in the
Kelco Business. In the event that there is technology within
Proprietary Rights which, as of the date hereof, is used or
intended by Merck for use in Merck's business (other than in the
Kelco Business), Buyer agrees to grant and hereby grants to Merck
a perpetual, non-exclusive, worldwide, paid-up license under
Buyer's rights to the technology for Merck to use such technology
as so used or intended for use solely in Merck's business (other
than the Kelco Business). For purposes of this Agreement,
"technology" shall not include trademarks, service marks, trade
names, copyrights or logos.
5.11. Danville Phase II. The Phase II Program as
-----------------
described in Schedule 5.11 (the "Phase II Program"), at the
Danville, Pennsylvania facility is an ongoing capital program
which will not be completed prior to the Closing. Merck through
and after the Closing shall be responsible, at its cost and
expense, for the Phase II Program and such Program shall be
completed and be brought into operation subsequent to the
Closing.
ARTICLE VI
COVENANTS OF BUYER
------------------
Buyer hereby covenants and agrees with Merck as
follows:
6.01. Cooperation by Buyer. (a) From the date
--------------------
hereof and prior to the Closing, Buyer will use its reasonable
best efforts and will cooperate with Merck, to promptly secure
all necessary consents, approvals, authorizations, exemptions and
waivers from third parties, including without limitation, under
the HSR Act or from any Governmental Authority, as shall be
required in order to enable Buyer to promptly effect the
transactions contemplated hereby, and will otherwise use its
reasonable best efforts to cause the prompt consummation of such
transactions in accordance with the terms and conditions hereof.
(b) In connection with the foregoing, Buyer shall
use its reasonable best efforts to resolve objections, if any, as
may be asserted with respect to the transactions contemplated
hereby under any antitrust or trade or regulatory laws or
regulations of any Governmental authority.
-36-
<PAGE> 43
6.02. Books and Records; Personnel. For a period of
----------------------------
seven years from the Closing Date:
(a) Buyer shall not dispose of or destroy any of
the Books and Records that may be relevant to Sellers without
first offering to turn over possession thereof to Sellers, at
Sellers' cost, by written notice to Sellers at least 30 days
prior to the proposed date of such disposition or destruction.
(b) Buyer shall allow Sellers and their agents
reasonable access to all Books and Records in Buyer's possession
and not in Sellers' possession during normal working hours at the
principal place of business of the Kelco Business or at any
location where any Books and Records are stored, and Sellers
shall have the right, at their own expense, to make copies of any
such Books and Records; provided, however, that any such access
or copying shall be had or done in such a manner so as not to
unduly interfere with the normal conduct of Buyer's business, and
provided further that (i) if disclosure of any information
contained in the Books and Records is compelled by legal process,
and such information is not publicly available and disclosure
thereof would adversely affect Buyer, Buyer shall have the right
to contest the disclosure of such information (which it shall do
promptly and with diligence or it shall forfeit such right) and
shall indemnify Sellers and their Affiliates and hold them
harmless against any Losses incurred by any of them by reason of
the non-disclosure of such information, and (ii) if disclosure of
any such information is not compelled by legal process, Buyer
shall first have the opportunity to require Sellers not to
disclose such information by agreeing in writing, in form and
substance reasonably satisfactory to Merck, to assume any
liability occasioning Sellers' request or otherwise to indemnify
Sellers and their Affiliates and hold them harmless against any
Losses incurred by any of them by reason of such non-disclosure.
(c) Buyer shall make available to Sellers upon
written request (i) copies of any Books and Records, (ii) Buyer's
personnel to assist Sellers in locating and obtaining any Books
and Records, and (iii) any of Buyer's personnel whose assistance
or participation is reasonably required by Sellers or any of
their Affiliates in anticipation of, or preparation for, existing
or future Litigation or other matters in which any of Sellers or
any of their Affiliates is involved. In addition, Buyer shall
otherwise cooperate with any reasonable request of Sellers in
connection with the performance, defense or discharge of the
Retained Liabilities. Merck shall reimburse Buyer for the
reasonable out-of-pocket expenses incurred by it in performing
the covenants contained in this Section 6.02(c), and Merck shall
reimburse Buyer for the reasonable value of the time spent by
such personnel in compliance with such clause (iii) of the first
sentence of this Section 6.02(c) or the second sentence of this
Section 6.02(c).
6.03. Bonds. At the Closing, Buyer will deliver
-----
to Merck Bonds in an aggregate principal amount and with
terms and from banks or other financial institutions,
-37-
<PAGE> 44
insurance companies or surety companies reasonably satisfactory to
Merck, to replace (or, to the extent required as described above, to
collateralize) (i) any performance bonds, payment bonds, bid bonds,
letters of credit and similar instruments ("Bonds") relating to the
Kelco Business, which are in existence on the date hereof and listed
on the Disclosure Schedule and (ii) such other Bonds obtained by the
Kelco Business in the ordinary course of business after the date
hereof (provided that Merck informs Buyer of the creation of any
such Bonds (in each case, or portions thereof)) and remaining
outstanding on the Closing Date with respect to which Merck or
any of its Affiliates will have any liability after the Closing,
provided that if any Bonds are issued during the seven days
- --------
immediately preceding the Closing Date, Buyer shall replace such
Bonds within 14 days after the Closing Date.
6.04. Further Assurances. At any time or from time
------------------
to time after the Closing, Buyer shall, at the request of Merck
and at Merck's expense, execute and deliver any further
instruments or documents and take all such further action as
Merck may reasonably request in order to accomplish the
consummation of the transactions contemplated hereby.
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
Merck and Buyer hereby covenant and agree with one
another as follows:
7.01. Excluded Assets of the Subsidiaries. Merck
-----------------------------------
shall have the right to cause the Subsidiaries to transfer at any
time prior to the Closing, to any Affiliate, by dividend or
otherwise without consideration, any assets owned by it which are
Excluded Assets; provided that Merck shall indemnify Buyer and
--------
its Affiliates and hold each of them harmless from and against
any Loss attributable to all liabilities and obligations,
including all Taxes, that may arise as a result of any such
transfer.
7.02. Ancillary Agreements. (a) Merck and Buyer
--------------------
shall execute and deliver a Contract Manufacturing Agreement for
the production of biogum at Merck's Danville, Pennsylvania
facility in the form attached as Exhibit 7.02(a) (the "Contract
Manufacturing Agreement"). Merck and Buyer further agree that
Buyer will have the option, exercisable during the twenty-fourth
month period following the Closing Date, to acquire from Merck
for the sum of $1.00 any or all of the personal property and
equipment solely used in the manufacture of Xanthan gum including
property and equipment to be deployed during the completion of
Phase II (the "Equipment") and Merck agrees to lease (on a triple
net basis) to Buyer for a nominal amount upon the exercise of such
option the applicable real property and/or portion of a building (the
"Space"), used (or to be used during Phase II) in connection with the
development and production of Xanthan gum products at Merck's
Danville, Pennsylvania facility (the "Danville Option"). Schedule
5.11 includes a list of all material Equipment currently in
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<PAGE> 45
place in the Danville, Pennsylvania plant and all such Equipment to be
deployed during the completion of Phase II.
The sale of Equipment and lease of Space contemplated
by the Danville Option shall take place thirty six months after
the Closing Date. Merck and Buyer agree to begin within six
months following the Closing to negotiate in good faith (x) the
process for transferring the Equipment and leasing (on a long-
term basis terminable by Buyer on reasonable notice) the Space to
Buyer in the event of Buyer's exercise of such option, (y) the
provision by Merck for such term as the parties may agree of such
support services to Buyer at the Danville facility as the parties
may agree upon, which shall include leasing Merck's then existing
employees at such facility, and (z) provisions to be applicable
in the event Buyer exercises the Danville Option, including an
appropriate covenant not to compete with respect to the
production of Xanthan gum. The Contract Manufacturing Agreement
shall terminate upon the sale of the Equipment and lease of
Space.
In the event that Buyer exercises the Danville Option,
Merck personnel shall be entitled to enter the Space in order to
use the fermenter at that location which is currently being used
to produce asparagenase and as may be required for regulatory
inspections in connection therewith. Such fermenter is not
currently used by Merck in its production of Xanthan gum, and is
not contemplated to be so used in the future. Merck shall be
granted reasonable access to such fermenter and Buyer hereby
agrees that it will not use such fermenter for any purpose.
Merck shall indemnify Buyer for any Loss incurred by Buyer in
connection with Merck's use of the fermenter referred to in this
paragraph.
In the event that Buyer shall exercise the option to
extend the Contract Manufacturing Agreement in accordance with
Section 13.1 thereof, then Buyer shall have the additional
option, exercisable from the thirty-sixth month following the
Closing Date and ending on the forty-eighth month following the
Closing Date, to purchase the Equipment and lease the Space on
the same terms as the Danville Option, except that the sale of
the Equipment and lease of the Space shall occur twelve (12)
months after the exercise of such additional option.
(b) Merck and Buyer shall execute and deliver a
Gelrite Supply Agreement for the production of Gelrite gellan gum
in the form attached as Exhibit 7.02(b).
(c) Merck and Buyer shall execute and deliver a
Lovastatin Supply Agreement for the production of lovastatin
fermentation solids in the form attached as Exhibit 7.02(c).
(d) Merck and Buyer each covenant and agree to
use their reasonable efforts to amend, or to cause to be amended,
the automobile leases relating to the vehicles primarily related
to the Kelco Business that are currently leased to Merck or
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<PAGE> 46
its Affiliates (collectively, the "Master Leases") so as to cause
Buyer to become the lessee of all such vehicles on terms no less
favorable in the aggregate to the lessee than the terms of the
Master Leases are to Merck and its Affiliates.
7.03. Covenant Not to Compete. (a) For the period
-----------------------
ending on the seventh anniversary of the Closing Date, neither
Merck nor any subsidiary or Affiliate (other than Affiliates in
which Merck owns less than a 25% equity interest and has no
involvement with any product that would be prohibited pursuant to
this Section 7.03, (it being understood that Merck may be
involved in other aspects of such Affiliate's business)) of
Merck, so long as they are owned or controlled, directly or
indirectly, by Merck, shall engage (including through the
provision of management or advisory services or through a joint
venture or partnership), anywhere in the world, in the
manufacture, sale, or distribution of any product being
developed, manufactured, sold, or distributed by the Kelco
Business on the Closing Date; provided, however, that nothing
-------- -------
contained herein shall preclude Merck or any subsidiary or
Affiliate of Merck from acquiring any interest in any business
(the "Acquired Business") some or all of the operations of which
would otherwise violate the foregoing prohibitions (the
"Competing Operations") so long as the acquiring entity divests
itself of the Competing Operations as soon as practicable, but no
later than 12 months, after such acquisition.
(b) For the period ending on the third
anniversary of the Closing Date, without the prior written
consent of Buyer neither Seller nor any subsidiary shall induce
or attempt to induce any employee of the Kelco Business to leave
the employ of Buyer or any of its subsidiaries. Sellers will not
hire without the prior written consent of Buyer any person who is
listed on Exhibit 7.03 (a "Restricted Employee") for one year
after any such Restricted Employee voluntarily leaves the employ
of Buyer.
(c) Without intending to limit the remedies
available to Buyer, Merck agrees that damages at law would be an
insufficient remedy to Buyer in the event of any breach by Merck
or any subsidiary of Merck of this Section 7.03 and that Buyer
shall be entitled to injunctive relief or other equitable
remedies in the event of any such breach (without the posting of
a bond or other security).
(d) If any of the provisions of this Section 7.03
are held to be unenforceable because of the scope, term or area
of their applicability, then the court making such determination
shall modify such scope, term or area or all of them to the
extent necessary to render this Section 7.03 enforceable under
applicable law, and such provisions shall then be enforced in
such modified form.
7.04. Intercompany and Intracompany Accounts. (a)
--------------------------------------
All claims and accounts among and between business units of
the Kelco Business outstanding at the Closing shall remain
outstanding and shall continue to be claims and obligations
of one business unit of the Kelco Business against another
business unit of the Kelco Business
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<PAGE> 47
(the "Kelco Business Intracompany Accounts"). In preparing
a combined balance sheet for the Kelco Business as of the
Closing, the Kelco Business Intracompany Accounts shall
offset each other and shall net to zero.
(b) All accounts or obligations between Merck and
its Affiliates, on the one hand, and the Subsidiaries, on the
other hand, that are not Kelco Business Intracompany Accounts,
shall be settled prior to the Closing Date.
(c) All accounts between the Kelco Business
(other than the Subsidiaries), on the one hand, and Merck and its
Affiliates, on the other hand, that are not Kelco Business
Intracompany Accounts, shall remain outstanding and shall be
Excluded Assets or Retained Liabilities, as the case may be.
7.05. Taxes. (a) Returns and Payments. Buyer shall
----- --------------------
cause the Subsidiaries to consent to join, for all taxable
periods of the Subsidiaries ending on or before the Closing Date
for which the Subsidiaries are eligible to do so, in any
consolidated federal income tax returns which Sellers shall
request them to join. Buyer agrees to cooperate with Sellers and
their affiliates in the preparation of the portions of such
returns pertaining to the Subsidiaries, and hereby agrees to take
no position inconsistent with the Subsidiaries being a member of
the consolidated groups to which such returns relate. Sellers
shall cause to be timely paid all Taxes to which such returns
relate for all periods covered by such returns.
(b) Tax Indemnification by Sellers. Except
------------------------------
as otherwise provided in Sections 7.05(b), 7.05(c) and 7.05(d),
Sellers shall be liable for, and shall indemnify Buyer and the
Subsidiaries and hold them harmless from and against any Loss
attributable to (i)(a) any and all Income Taxes for any Pre-
Closing Tax Period due or payable by the Subsidiaries with
respect to the Subsidiaries, and (b) any Taxes attributable to
any amounts that the Subsidiaries are required to include in
income after the Closing as a result of a change in method of
accounting for a Pre-Closing Tax Period, as a result of any
closing or other agreement entered into with any taxing authority
prior to the Closing, or as a result of a sale of property prior
to the Closing reported on the installment method, (ii) (a) any
Taxes of any member of any affiliated group of which any of the
Sellers or Subsidiaries is or was a member assessed against any
Subsidiary for any taxable period of such affiliated group ending
on or before or including the Closing Date by reason of its being
liable under Treasury Regulations Section 1.1502-6 or any
analogous state, local, or foreign tax law, (b) any Taxes for
which the Kelco Business or any Subsidiary is liable as successor
or transferee where the Kelco Business or Subsidiary became a
successor or transferee on or before the Closing Date, and (c)
any Taxes for which the Kelco Business or any Subsidiary is
liable as a result of a Tax allocation, indemnification or other
similar agreement entered into pursuant to (x) the sale of any
subsidiary of any Subsidiary or (y) the sale of any assets of
any Subsidiary outside of the ordinary course of business, in
each case prior to the Closing Date, and (iii) any Other
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<PAGE> 48
Taxes payable with respect to either (a) any Pre-Closing Tax Period or
(b) with respect to Other Taxes which are not reported on a periodic
basis, any Other Taxes payable with respect to transactions occurring
prior to the Closing, except that (iv) with respect to Other Taxes
payable by the Subsidiaries with respect to taxable periods beginning
prior to and ending after the Closing Date (a "Straddle Period"),
Sellers' liability shall be limited (a) in the case of sales,
transfer, excise, withholding, value added, gross receipts and any
other taxes levied on transfers or transactions, to tax liabilities
accruing with respect to transfers or transactions occurring on or
before the time of Closing, and (b) in the case of any taxes not
otherwise enumerated other than Property Taxes (the liability for
which shall be determined under Section 7.05 (k) hereof), to tax
liabilities attributable, on a days-elapsed basis, to any Pre-
Closing Tax Period. Any amounts owed by Sellers to Buyer
pursuant to this paragraph shall be paid by Sellers within five
days of Buyer's request therefor or five days prior to the date
on which Buyer is required to cause to be paid the related Tax
liability, whichever is later.
(c) Tax Indemnity by Buyer. Except where this
----------------------
Agreement otherwise allocates liability in respect of Taxes to
Sellers, Buyer shall be liable for, and shall hold Sellers
harmless from and against any Loss attributable to (i) any and
all Income Taxes for any taxable period beginning after the
Closing Date (and any Taxes attributable to any transactions
entered into on the Closing Date after the Closing outside the
ordinary course of any Subsidiary's business), due and payable by
the Subsidiaries, (ii) any and all Other Taxes due and payable by
the Subsidiaries other than (a) Other Taxes referred to in
Section 7.05(b)(iii) or (iv) for which Sellers have indemnified
Buyer or (b) Property Taxes (the liability for which shall be
determined under Section 7.05 (k) hereof), (iii) any and all
Taxes arising from any sale or other disposition of assets of the
Subsidiaries after the Closing (including on the Closing Date).
Any amounts owed by Buyer to Sellers pursuant to this paragraph
shall be paid by Buyer within five days of Sellers' request
therefor or five days prior to the date on which Sellers are
required to cause to be paid the related Tax liability, whichever
is later.
(d) Allocation of Certain Income Taxes. Any
----------------------------------
Income Taxes with respect to the Subsidiaries attributable to a
Straddle Period shall be apportioned between Sellers and Buyer
based on the actual operations and transactions of the
Subsidiaries during the portion of such period ending on the
Closing Date and the portion of such period beginning on the day
following the Closing Date, and for purposes of the provisions of
Sections 7.05(b), (c) and (d), each portion of such period shall
be deemed to be a taxable period (whether or not it is in fact a
taxable period); provided, however, that such apportionment shall
-------- -------
exclude any income, gain, loss, credit or deduction arising from
any transactions entered into on the Closing Date after the
Closing outside the ordinary course of any Subsidiary's business
and such transactions shall be allocated to the period beginning
on the day following the Closing Date; provided further, however,
-------- ------- -------
that to the extent estimated Income Taxes have been paid prior to
the Closing Date with respect to a Straddle Period, Sellers'
liability with respect thereto shall be reduced by that amount;
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<PAGE> 49
provided, further, that if such payment of estimated Income Taxes
- -------- -------
exceeds the Tax liability Sellers would have owed with respect to
the pre-Closing portion of such Straddle Period if such period
had constituted a separate taxable period (without regard to
refunds or carrybacks which are treated in Section 7.05(f)(iii)),
Buyer shall pay Sellers the amount of such excess within five
days of the receipt of a Tax Benefit in the form of a Tax refund
or interest with respect to such refund or diminution of Taxes
owing on the due date for payment of such Taxes (reduced by any
net Tax Detriment imposed with respect to such Tax refund or any
interest paid with respect to such refund). Any amounts owed by
Sellers to Buyer pursuant to this paragraph shall be paid by
Sellers within five days of Buyer's request therefor or five days
prior to the date on which Buyer is required to cause to be paid
the related tax liability, whichever is later.
(e) Filing Responsibility. Sellers shall prepare
---------------------
and file on behalf of any of the Subsidiaries which are either
United States or Canadian corporations all Returns with respect
to either (a) Pre-Closing Tax Periods or (b) to the extent not
covered in (a), Other Taxes for which Sellers have liability
pursuant to Section 7.05(b)(iii). Buyer shall prepare and file,
or shall cause the Subsidiaries to prepare and file, (x) as
reasonably directed (except where it would be, in Buyer's good
faith reasonable judgment, inconsistent with applicable Tax law)
by Sellers all Returns for (a) all Pre-Closing Tax Periods and
(b) to the extent not covered in (a), Other Taxes for which
Sellers have liability pursuant to Section 7.05(b)(iii), in each
case for which Sellers do not have filing responsibility pursuant
to this Section 7.05(e), (y) subject to Sellers' reasonable
review and approval, and consistent with past practice (except
where it would be, in Buyer's good faith reasonable judgment,
inconsistent with applicable Tax law), all Returns with respect
to Straddle Periods (a "Straddle Return"), and (z) all other
Returns for which Sellers do not have filing responsibility
pursuant to this Section 7.05(e). Buyer and Sellers shall
cooperate in the preparation of all Straddle Returns. If Buyer
and Sellers cannot agree on (i) the reporting position to take
with respect to such Straddle Returns, (ii) the allocation of
Taxes between Buyer and Sellers with respect thereto or (iii)
whether any position taken on a return described in clause (x) of
the second sentence of this paragraph (e) is inconsistent with
applicable Tax law, such dispute shall be resolved by prompt
submission to an arbitrator, which arbitrator shall be a "Big
Six" accounting firm acceptable to Buyer and Sellers and not
affiliated with either. The costs of such arbitration shall be
borne equally by Buyer and Sellers.
(f) Refunds and Carrybacks. (i) Except as
----------------------
provided in (vi) below, Sellers shall be entitled to any refunds
of Income Taxes paid by or on behalf of the Subsidiaries
(including refunds paid by means of a credit against other or
future Tax liabilities) arising with respect to taxable periods
ending on or before the Closing Date.
(ii) Buyer or the Subsidiaries, as the case
may be, shall be entitled to any refunds of Income Taxes paid by
or on behalf of the Subsidiaries (including
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<PAGE> 50
refunds paid by means of a credit against other or future Tax
liabilities) arising with respect to taxable periods beginning on or
after the Closing Date.
(iii) Sellers and Buyer shall allocate refunds
of Income Taxes of the Subsidiaries (including refunds paid by
means of a credit against other or future Tax liabilities)
arising with respect to taxable periods described in Section
7.05(d) to whichever of Sellers, Buyer, or both initially bore
the items to which such refund is attributable.
(iv) If Other Taxes attributable to the pre-
Closing Date portion of taxable periods which begin prior to and
end after the Closing Date are less than the payments of such
Taxes made by Sellers or, prior to the Closing Date, by the
Subsidiaries, as the case may be, with respect to such period,
Buyer and the Subsidiaries, as the case may be, shall pay or
shall cause to be paid to Sellers the excess of such previous
payments over any Other Taxes attributable to such pre-Closing
periods immediately upon the receipt by Buyer or the Subsidiaries
of the benefit of such excess payments through any refund,
credit, or reduction in any Tax payment required to be made by
Buyer or the Subsidiaries after the Closing. Sellers shall be
entitled to any refunds or credits of Other Taxes for which
Sellers are liable pursuant to Section 7.05(b)(iii). Buyer or
the Subsidiaries, as the case may be, shall be entitled to any
other refunds or credits of Other Taxes.
(v) Buyer shall cause the Subsidiaries promptly
to forward to Sellers or to reimburse Sellers for any refunds due
Sellers (pursuant to the terms of this Section 7.05) after
receipt thereof (less any net Tax Detriment imposed with respect
to such refunds or any interest paid with respect to such
refunds), and Sellers shall promptly forward to Buyer or
reimburse Buyer for any refunds due Buyer (pursuant to the terms
of this Section 7.05) after receipt thereof (less any net Tax
Detriment imposed with respect to such refunds or any interest
paid with respect to such refunds). In the case of a refund
received in the form of a credit against other or future Tax
liabilities, reimbursement in respect of such refund shall be due
in each case on the due date for payment of the Taxes against
which such refund has been credited. If any of the Sellers
reasonably so requests, Buyer shall cause the Subsidiaries, at
Seller's expense, to file for and pursue any refund to which the
Sellers are entitled under this Section 7.05. If the Buyer
reasonably so requests, Sellers shall file for and, at Buyer's
expense, pursue any refund to which Buyer and the Subsidiaries
are entitled to under this Section 7.05.
(vi) Buyer and the Subsidiaries agree that if
the Subsidiaries carry back any item of loss, deduction or credit
which arises in any taxable period ending after the Closing Date
("Subsequent Loss") into any taxable period beginning before the
Closing Date, then (a) Buyer shall be entitled to any Tax Benefit
or refund of Taxes realized as a result thereof with respect
to any Tax not reported on a consolidated or
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<PAGE> 51
combined basis, and (b) Sellers shall be entitled to any other Tax
Benefit or refund of Taxes realized as a result thereof, subject to
Section 7.05(f)(iii).
(g) Cooperation. After the Closing Date, each of
-----------
Buyer and any of Sellers shall make available to the other, as
reasonably requested, and to any Taxing Authority, all
information, records or documents relating to Tax liabilities or
potential Tax liabilities of Sellers and the Subsidiaries for all
periods prior to or including the Closing Date (and access to Tax
personnel having knowledge thereof) and shall preserve all such
information, records and documents until the expiration of any
applicable statute of limitations or extension thereof. Buyer
shall prepare and provide to Sellers such federal, state, local
and foreign Tax information packages as Sellers shall request for
Sellers' use in preparing any Return that relates to Sellers (in
respect of the Kelco Business) or the Subsidiaries. Such Tax
information packages shall be completed by Buyer and provided to
Sellers within the time period that is consistent with such
Subsidiary's past practice, but in no event sooner than 90 days
after the close of the relevant taxable year. Notwithstanding
any other provisions hereof, each party shall bear its own
expenses in complying with the foregoing provisions.
(h) Audits. Buyer shall promptly notify Sellers
------
in writing upon receipt by Buyer or any Affiliate of Buyer
(including the Subsidiaries) of notice of any pending or
threatened Tax audits or assessments which may affect the Tax
liabilities of Sellers or the Subsidiaries for which Sellers
would be liable under Section 2.02(d) or 7.05. Sellers shall
have the sole right to represent their own interests and the
interests of any of the Subsidiaries in any tax matter, including
any audit or administrative or judicial proceeding, the
settlement of such audit or proceeding or the filing of any
amended return (a "Tax Matter"), involving a Tax liability or
potential Tax liability for which Sellers would be liable under
Section 2.02(d) or 7.05, or a refund arising with respect to a
Pre-Closing Tax Period to which Sellers would be entitled
pursuant to Section 7.05(f)(v), and to employ counsel of their
choice at their expense. Buyer agrees that it will cooperate
fully with Sellers and their counsel in the defense or compromise
of any Tax Matter.
(i) Purchase Price. The Purchase Price
--------------
Allocation shall be determined as specified in Section 2.06.
(j) Tax Sharing. As of the Closing, the
-----------
Subsidiaries shall have no rights or obligations with respect to
any taxable period under any tax-sharing or similar agreement
other than pursuant to this Agreement.
(k) Property Taxes. At the Closing, all Property
--------------
Taxes relating to the Assets or the Subsidiaries, and arising
with respect to the current fiscal period, shall be allocated
between Buyer and Merck on a days-elapsed basis with the Closing
Date being treated as a day elapsed for this purpose. In
accordance with the preceding sentence, (i) with respect to
Property Taxes for the current fiscal period paid in advance
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<PAGE> 52
of the Closing, Buyer shall pay to Sellers at the Closing as a
purchase price adjustment an amount representing the post-Closing
Date portion of any such taxes, and (ii) with respect to Property
Taxes for the current fiscal period which are payable in arrears,
Sellers shall pay to Buyer at the Closing as a purchase price
adjustment an estimated amount representing the portion of such
Property Taxes that relates to the period that precedes and includes
the Closing Date (calculated based on the amount of Property Taxes
paid for the immediately preceding comparable fiscal period if such
figure has not otherwise been determined by the relevant Taxing
Authority) and shall pay to Buyer promptly upon request such
additional amount as is equal to the difference between the actual
amount of Property Taxes paid for such period and the estimated amount
paid to Buyer at Closing; provided, however, that in each case,
-------- -------
Sellers' liability shall be limited to its share of the Property Tax
liability calculated by disregarding any increase in assessment
attributable to the transactions described in this Agreement.
(l) Section 338(h)(10) Elections. If Buyer
----------------------------
requests, Sellers and Buyer shall join in timely making one or
more elections under Code Section 338(h)(10) with respect to
those Subsidiaries designated by Buyer (and any similar elections
under state, local or foreign Tax law) (collectively, a "Section
338(h)(10) Election"). Buyer shall prepare and file the forms
with respect to such Section 338(h)(10) Elections in accordance
with applicable law and consistent with the Purchase Price
Allocation. Sellers shall pay (and indemnify Buyer and its
Affiliates against any Losses attributable to) any Taxes imposed
as a result of such Section 338(h)(10) Elections, including any
Taxes attributable to the making of an election under state,
local or foreign Tax law corresponding to an election under Code
Section 338(g) where (a) a taxing jurisdiction does not recognize
an election corresponding to an election under Code Section
338(h)(10) or (b) a taxing jurisdiction does not apply its
provisions corresponding to Code Section 338(h)(10) (because, for
example, the Sellers' federal consolidated group is different
from the Sellers' state combined or consolidated group).
(m) Purchase Price Adjustment. Any payments made
-------------------------
pursuant to this Section shall be treated as an adjustment to the
Purchase Price for Tax purposes.
(n) Buyer shall be entitled to deduct from any
amount payable to a Seller hereunder any Tax imposed on such
Seller and required to be withheld under applicable Tax law from
such payment, provided that any amount so withheld is paid to the
proper taxing authority and Buyer provides the Seller with
reasonably satisfactory evidence of the payment thereof. Sellers
shall reimburse Buyer for any such withholding Tax imposed with
respect to any payment hereunder and paid by Buyer to a taxing
authority to the extent that such withholding Tax was not
withheld from a payment to Sellers hereunder.
(o) Sellers shall cooperate with Buyer
in determining the Tax costs and benefits to Sellers and Buyer
from restructuring the acquisition of Kelco
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<PAGE> 53
International Limited and Kelco Specialty Colloids, Ltd. (the "Foreign
Subsidiaries") and any of their subsidiaries in whole or in part as an
asset acquisition. If Buyer so requests, Buyer and Sellers shall
negotiate in good faith to restructure the acquisition of the Foreign
Subsidiaries and any of their subsidiaries designated by
Buyer as an asset acquisition subject to the following
qualifications:
(i) Buyer shall indemnify and hold harmless
Sellers, the Foreign Subsidiaries and affiliates of
either on an after-tax basis in respect of any Taxes
incurred by Sellers, the Foreign Subsidiaries and
affiliates of either to the extent in the aggregate in
excess of the Taxes that would have been imposed had
Sellers sold the shares of the Foreign Subsidiaries to
Buyer -- any payment made pursuant to this clause (i)
shall be calculated taking into account, in each case,
the impact of foreign Tax credits arising from the
transaction to the extent actually utilizable by
Sellers, computed on a present-value basis (it being
understood that Sellers, the Foreign Subsidiaries and
affiliates of either shall be compensated and made
whole for any net detriment they suffer on account of
the application of such foreign tax credits in
connection with such restructuring, such compensation
to be paid promptly upon written request therefor by
Sellers at any time on or after the date Sellers, the
Foreign Subsidiaries or affiliates of either suffer
such detriment by reason of an increased Tax payment);
(ii) The transaction as restructured does not
result in any aggregate additional costs or expenses to
Sellers, the Foreign Subsidiaries and affiliates of
either (on an after-tax basis and after taking into
account any undertaking for payment of such costs or
expenses by Buyer) when compared to the costs and
expenses that Sellers would have incurred if the
transaction had not been restructured;
(iii) Buyer and Sellers are reasonably
satisfied with the non-tax aspects of the
restructuring; and
(iv) Sellers and the Foreign Subsidiaries
shall have no liability or exposure to Buyer or any
third party with respect to the transaction as
restructured (including under this Agreement) which
Sellers and the Foreign Subsidiaries would not have had
if the transaction had not been restructured (unless,
with respect to any liability or exposure to a third
party, Buyer indemnifies Seller). Notwithstanding
anything contained herein, the failure of Buyer and
Sellers to restructure the transaction as provided in
this Section shall not be a condition to Closing and
each party shall be obligated under such circumstances
to consummate the transactions contemplated by this
Agreement subject to the other terms and conditions of
this Agreement.
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<PAGE> 54
7.06. Agreement with Bristol-Myers Squibb Company.
-------------------------------------------
Buyer acknowledges and agrees, solely with respect to the Assets
and the Kelco Business, to be bound by the provisions of Section
7.03(a) of the Agreement of Purchase and Sale, dated as of
November 2, 1994, by and among Merck, Calgon Vestal Laboratories,
Inc., CVL Acquisition Corp. and Bristol-Myers Squibb Company;
provided, however, that Buyer may manufacture product solely for
testing and obtaining regulatory approvals. Buyer further
covenants and agrees that, after the Closing Date, in connection
with the Kelco Business, it shall not, in any manner, use the
proprietary rights or proprietary technology of the CVL Business
with respect to alginate based wound management technology, so
long as such rights and technology remain proprietary.
7.07. Secrecy Agreements. Merck shall use
------------------
commercially reasonable efforts (without being obligated to make
any payments therefor) to promptly obtain, either prior to or
after the Closing Date, secrecy agreements in Buyer's standard
format, a copy of which has been furnished to Merck, from Merck's
employees who are materially involved in the production of
Xanthan gum. After the Closing Merck shall use reasonable best
efforts to enforce, at Buyer's request and on Buyer's behalf,
Merck's rights under any secrecy agreement between Merck and
Merck's employees who are involved in the production of Xanthan
gum.
7.08. Foreign Approvals. Buyer and Sellers shall
-----------------
cooperate to promptly identify any required approval from any
foreign Governmental Authorities and each of them shall use their
reasonable best efforts to obtain all required approvals from
foreign Government Authorities as promptly as practicable. To
the extent any such approval is required, and either cannot, or
has not, been obtained prior to Closing, Buyer and Sellers shall
cooperate to put into effect alternate arrangements with respect
thereto, so that the Closing may take place and Buyer shall
obtain the benefits with respect to the business for which the
consents have not been obtained. Notwithstanding anything
contained herein, Buyer and Sellers shall not be obligated to
close the transactions contemplated hereby if the failure to
obtain any such foreign approval would have a Material Adverse
Effect, and Buyer and Seller shall be obligated, subject to the
terms and conditions hereof, to close the transactions
contemplated hereby, if the failure to obtain such foreign
regulatory approval would not have a Material Adverse Effect.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligations of Buyer to purchase the Assets and the
Stock shall be subject to the satisfaction (or waiver) on or
prior to the Closing Date of all of the following conditions:
8.01. Representations, Warranties and Covenants of Merck.
--------------------------------------------------
Merck shall have complied in all material respects with its agreements
and covenants contained herein
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<PAGE> 55
to be performed on or prior to the Closing Date, and the
representations and warranties of Merck contained herein shall be true
(except where the failure to be true would not (after giving effect to
any adjustment with respect to Final Closing Working Capital) have a
Material Adverse Effect or materially impair Merck's ability to
consummate the transactions contemplated by this Agreement) when
made and on and as of the Closing Date with the same effect as
though made on and as of the Closing Date, except (a) as
otherwise contemplated hereby and (b) to the extent that any such
representations and warranties were made as of a specified date
and as to such representations and warranties the same shall have
been true as of the specified date (except where the failure to
be true would not have a Material Adverse Effect or materially
impair Merck's ability to consummate the transactions
contemplated by this Agreement). Buyer shall have received the
Seller's Certificate.
8.02. No Prohibition. No statute, rule or regulation
--------------
or order of any court or administrative agency shall be in effect
which prohibits Buyer from consummating the transactions
contemplated hereby.
8.03. Governmental Consents. The applicable waiting
---------------------
period under the HSR Act shall have expired or been terminated
and no Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation,
injunction or other order which is in effect and has the effect
of making the transactions contemplated by this Agreement illegal
or otherwise prohibiting consummation of such transactions;
provided, however, that the provisions of this Section 8.03 shall
- -------- -------
not apply if Buyer has directly or indirectly solicited or
encouraged any such action.
8.04. Documents. Buyer shall have received the
---------
documents referred to in Section 2.01(c).
8.05. Agreements. The agreements referred to in
----------
Section 7.02 shall have been executed and delivered.
ARTICLE IX
CONDITIONS TO SELLERS' OBLIGATIONS
----------------------------------
The obligation of Sellers to sell the Assets and the
Stock shall be subject to the satisfaction (or waiver) on or
prior to the Closing Date of all of the following conditions:
9.01. Representations, Warranties and Covenants of Buyer.
--------------------------------------------------
Buyer shall have complied in all material respects with its agreements
and covenants contained herein to be performed on or prior to the
Closing Date, and the representations and warranties of Buyer
contained herein shall be true (except where failure to be true would
not have a material adverse effect on Buyer's ability to consummate
the transactions contemplated
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<PAGE> 56
hereby or materially impair Buyer's ability to consummate the
transactions contemplated by this Agreement) when made and on and
as of the Closing Date with the same effect as though made on and
as of the Closing Date, except (a) as otherwise contemplated
hereby and (b) to the extent that any such representations and
warranties were made as of a specified date and as to such
representations and warranties the same shall have been true as
of the specified date (except where failure to be true would not
have a material adverse effect on Buyer's ability to consummate
the transactions contemplated hereby or materially impair Buyer's
ability to consummate the transactions contemplated by this
Agreement). Merck shall have received the Buyer's Certificate.
9.02. No Prohibition. No statute, rule or regulation
--------------
or order of any court or administrative agency shall be in effect
which prohibits Merck from consummating the transactions
contemplated hereby.
9.03. Governmental Consents. The applicable waiting
---------------------
period under the HSR Act shall have expired or been terminated
and no Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation,
injunction or other order which is in effect and has the effect
of making the transactions contemplated by this Agreement illegal
or otherwise prohibiting consummation of such transactions;
provided, however, that the provisions of this Section 9.03 shall
- -------- -------
not apply if Seller has directly or indirectly solicited or
encouraged any such action.
9.04. Documents. Merck shall have received the
---------
documents referred to in Section 2.01(c).
9.05. Agreements. The agreements referred to in
----------
Section 7.02 shall have been executed and delivered.
ARTICLE X
EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS
---------------------------------------------
10.01. Definitions. (a) The term "Employees" shall
-----------
mean all current employees (including those on temporary layoff,
short-term disability or leave of absence, whether paid or unpaid
and specifically excluding any independent contractor, consultant
(other than those two individuals identified on Schedule 3.16 by
an asterisk), adviser or agent or Employees on long-term
disability as of the Closing), other than employees who are
covered by a collective bargaining agreement (the "Union
Employees"), of the Kelco Business, and the term "Employee" shall
mean any of the Employees.
(b) The term "Company Benefit Plans" shall mean
each and all "employee benefit plans" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained or contributed to by the Kelco Business or in
which employees of the Kelco Business participate or participated and
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<PAGE> 57
which provides benefits to U.S. based or U.S. paid Employees or Union
Employees, including (i) any such plans that are "employee welfare
benefit plans" as defined in Section 3(1) of ERISA, (ii) any such
plans that are "employee pension benefit plans" as defined in Section
3(2) of ERISA, as well as any comparable benefit plans covering the
Employees or Union Employees of any Subsidiary and the Employees or
Union Employees located or paid outside the U.S.
(c) The term "Benefit Arrangements" shall mean
each and all pension, supplemental pension, accidental death and
dismemberment, life and health insurance and benefits (including
medical, dental and hospitalization), savings, bonus, deferred
compensation, incentive compensation, holiday, vacation,
severance pay, salary continuation, sick pay, sick leave, short
and long term disability, tuition refund, service award, company
car, scholarship, relocation, fringe benefit and other employee
benefit arrangements, plans, contracts (other than individual
employment, consulting or severance contracts), policies or
practices of the Kelco Business providing employee or executive
compensation or benefits to Employees or Union Employees, other
than the Company Benefit Plans or Foreign Benefit Plans.
(d) The term "Foreign Benefit Plans" shall mean
plans, arrangements or understandings that would be Company
Benefit Plans or Benefit Arrangements but for the fact that such
plans, arrangements or understandings cover or relate to
Employees of the Subsidiaries and Employees located outside the
U.S. and are not subject to ERISA.
10.02. Employment. (a) Except as provided in
----------
Section 10.07, as of the Closing Date, Buyer shall offer
employment to, and shall cause each Subsidiary to continue the
employment of, all current Employees and Union Employees at
salaries and wages and in positions that are substantially
comparable in the aggregate to those in effect immediately prior
to the Closing Date. Buyer shall assume all obligations of
Seller and its Affiliates under all collective bargaining
agreements and all employment, consulting and severance
agreements with any Employee or Employees set forth on the
Disclosure Schedule (except as noted thereon).
(b) Except as provided in Section 10.07, after
the Closing Date, all Employees, other than Union Employees, who
become employees of Buyer or its Affiliates as of the Closing
Date or who continue employment with any Subsidiary as of the
Closing Date ("Buyer's Employees"), shall be treated in a similar
manner as the other employees of Buyer similarly situated with
respect to the terms and conditions of employment, and Buyer's
Employees shall be entitled to participate on the same basis as
other employees of Buyer and its Affiliates in all job training,
career development and educational programs of Buyer and its
Affiliates in connection with any management or executive job
opportunities or any other promotional opportunities with Buyer
and its Affiliates.
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<PAGE> 58
10.03. Pension Plans. (a) As of the Closing Date,
-------------
the Employees and Union Employees shall cease active
participation in the following plans: (i) The Retirement Plan
for the Salaried Employees of Merck & Co., Inc.; (ii) The
Retirement Plan for the Hourly Employees of Merck & Co., Inc.;
(iii) Merck & Co., Inc. Employee Savings and Security Plan;
(iv) Merck & Co., Inc. Employee Stock Purchase and Savings Plan;
(v) Merck & Co., Inc. International Pension Plan; (vi) Merck
Frosst Canada, Inc. Retirement Plan; and (vii) the Merck
sponsored pension plans applicable to Employees in Australia and
Japan (collectively, the "Pension Plans"); and Seller shall take,
or cause to be taken, all such action as may be necessary to
effect such cessation of participation. The Pension Plans shall
make distributions, if applicable, to Employees and Union
Employees in accordance with their terms.
(b) Buyer and Merck acknowledge that (i) there
shall be no transfer of assets from the Pension Plans to any
benefit plan of Buyer or any of its Affiliates and Buyer and its
Affiliates shall have no right, title or interest in respect of
the assets of the Pension Plans and (ii) Buyer and its Affiliates
shall have no liabilities or obligations with respect to the
Pension Plans.
10.04. Severance. (a) Buyer agrees to provide
---------
severance pay and other severance benefit entitlements which may
be owing to any Employee or Union Employee whose employment is
terminated other than for cause by Buyer or any Subsidiary within
two years after the Closing Date. Such severance pay and
severance benefit entitlements shall be determined (on an
Employee by Employee basis) in accordance with the more favorable
to the terminated Employee of (x) the severance policy of the
Kelco Business applicable to such Employee as of the date hereof
(copies of which have been furnished to Buyer), or (y) the
severance policy of Buyer in effect at the time of such
termination. Any severance payments to be made pursuant to this
Section 10.04 shall be made pursuant to Buyer's plan or plans
which shall be amended to the extent necessary to effectuate the
provisions of this Section 10.04. Buyer agrees to provide
relocation expenses for Employees on international assignment to
the extent payable under Buyer's plans or policies.
(b) Buyer shall indemnify Merck and its
Affiliates and hold each of them harmless from and against any
Losses which may be incurred or suffered by any of them under the
Worker Adjustment and Retraining Notification Act arising out of,
or relating to, any actions taken by Buyer on or after the
Closing Date.
10.05. Other Benefit Plans. (a) Except as provided in
-------------------
Section 10.07, following the Closing Date, Buyer shall provide Buyer's
Employees with all of the compensation and benefit plans, programs and
arrangements generally available to the other employees of Buyer similarly
situated ("Buyer's Benefit Plans") and except as provided in Section
10.05(b), such Employees shall be eligible to participate in Buyer's
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<PAGE> 59
Benefit Plans on the same basis and under the same terms as the other
employees of Buyer similarly situated.
(b) Notwithstanding any other provision in
this Article X and subject to such information being accurately
provided to Buyer, Buyer shall, and shall cause each Subsidiary
to, grant all of Buyer's Employees and all Union Employees who
are hired by Buyer ("Buyer's Union Employees") from and after the
Closing Date credit for all service with Merck, any Subsidiary
and their Affiliates and their respective predecessors prior to
the Closing Date for all purposes for which such service was
recognized by Merck, such Subsidiary and their Affiliates
including without limitation, vacation pay, severance plans or
policies, eligibility for participation and vesting and, if
applicable, early retirement eligibility in Buyer's Benefit
Plans, including those providing retiree medical benefits, and
any other seniority based plan, practice, policy or arrangement,
except that Buyer's Employees and Buyer's Union Employees shall
not receive credit for purposes of accrual of benefits under any
defined benefit pension plans. To the extent Buyer's Benefit
Plans include medical or dental benefits, such plans shall waive
any pre-existing conditions and actively-at-work requirements and
shall provide that any expenses incurred on or before the Closing
Date shall be taken into account under Buyer's Benefit Plans for
purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions.
10.06. Vacation. With respect to Buyer's Employees
--------
and Buyer's Union Employees, Buyer will recognize all accrued and
unused vacation days which have accrued to Buyer's Employees and
Buyer's Union Employees through the Closing Date and Buyer will
allow Buyer's Employees and Buyer's Union Employees to take their
accrued vacation days at any time following the Closing Date,
assuming such accrued vacation days shall be taken in accordance
with Buyer's vacation policy and so as not to disrupt Buyer's
business.
10.07. Foreign Employees. Notwithstanding any other
-----------------
provision in this Article X to the contrary, as of the Closing
Date Buyer shall offer employment to, and shall cause each
Subsidiary to continue the employment of, on substantially the
same terms and conditions in the aggregate as in effect on the
Closing Date all Employees and Union Employees employed by Merck,
the Subsidiaries or their Affiliates, in connection with the
Kelco Business who are employed outside the United States
("Foreign Employees") and to assume or retain, as the case may
be, all liabilities and obligations of Merck and its Affiliates
with respect to the Foreign Employees, which arise by reason of
the transactions contemplated hereby. Notwithstanding the
foregoing, Buyer shall not have any liability as a result of the
termination or deemed termination of employment of any such
Employee except such liability which results from any action by
Buyer, the Subsidiaries or their Affiliates on or after the
Closing Date (including on account of any change in the terms and
conditions of employment and notwithstanding that Buyer may have
complied with its obligations under the first sentence of this
Section 10.07).
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<PAGE> 60
10.08. Post-Retirement Health and Life Insurance Benefits.
--------------------------------------------------
With respect to the Employees and Union Employees who have retired
prior to the Closing Date and who are eligible to retire as of the
Closing Date even if they have not retired, Buyer and Merck agree that
Merck and its Affiliates shall retain all liabilities and obligations
to provide post-retirement health and life insurance benefits to such
Employees and Union Employees; provided, however, that this Section
-------- -------
10.08 shall not be construed or interpreted to enlarge in any way the
rights of such Employees or Union Employees with respect to such post-
retirement benefits.
10.09. Foreign Pension Plans. Buyer shall, or shall
---------------------
cause the applicable Subsidiary to assume all assets, obligations
and liabilities relating to the U.K. Pension Plan, the French
Pension Plan and the German Pension Plan as of the Closing Date
and Sellers shall retain all assets, obligations and liabilities
with respect to all Pension Plans other than the U.K. Pension
Plan, the French Pension Plan and the German Pension Plan. Prior
to the Closing, (i) Merck shall contribute or cause to have been
contributed to the U.K. Pension Plan such amount, if any,
necessary so that the fair market value of the assets of such
plan equals or exceeds the present value of the liabilities of
the plan determined on an ongoing plan basis using the actuarial
assumptions currently in effect for purposes of funding such
plan, (ii) shall have or cause to have been contributed all
amounts required to be contributed under the French Pension Plan
in respect of all periods prior to the Closing, including for any
partial plan year ending on the Closing Date, and (iii) shall or
shall have caused the liabilities of the German Pension Plan to
be reflected as a reserve included in current liabilities on the
Balance Sheet. For purposes of the foregoing sentence, plan
liabilities shall be determined at a level that is at least the
same amount that would be required by SFAS No. 87. After giving
effect to the contribution described in clause (i) of the
preceding sentence, Merck shall cause the Trustee of the U.K.
Pension Plan to review the actuarial assumptions currently in
effect. To the extent that the Trustee recommends changes in
such assumptions that would increase the Plan's liabilities,
Merck agrees to contribute additional assets to the Plan up to a
maximum of $1 million. Upon completion of the transfer, Merck
and Sellers shall have no liabilities or obligations or rights
relating to the U.K. Pension Plan, the French Pension Plan or the
German Pension Plan. Buyer shall, with respect to Foreign
Employees eligible to participate in the U.K. Pension Plan, the
French Pension Plan and the German Pension Plan, recognize all
service of such Foreign Employees with Merck and the applicable
Subsidiary for all purposes under such Plan.
ARTICLE XI
TERMINATION PRIOR TO CLOSING
----------------------------
11.01. Termination. This Agreement may be terminated
-----------
at any time prior to the Closing:
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<PAGE> 61
(a) By the mutual written consent of Buyer and
Merck; or
(b) By either Merck or Buyer in writing, without
liability to the terminating party on account of such termination
(provided the terminating party is not otherwise in default or in
breach of this Agreement), if the Closing shall not have occurred
on or before September 30, 1995; or
(c) By either Merck or Buyer in writing, without
liability to the terminating party on account of such termination
(provided the terminating party is not otherwise in default or in
breach of this Agreement), if (a) there shall have been a
material breach by the other party of any of its representations,
warranties, covenants or agreements contained herein and (b) such
breach would result in a failure to satisfy a condition to the
terminating party's obligation to consummate the transactions
provided herein.
11.02. Effect on Obligations. Termination of this
---------------------
Agreement pursuant to this Article XI shall terminate all
obligations of the parties hereunder, except for the obligations
under Sections 3.18, 4.07, 11.02, 12.01, 13.07, 13.09, 13.10,
13.11 and the last sentence of Section 5.03; provided, however,
that termination pursuant to clause (b) or (c) of Section 11.01
by reason of breaches of covenants or agreements, or by reason of
a breach by Buyer of its representations and warranties contained
in Section 4.04 shall not relieve the defaulting or breaching
party from any liability to the other party hereto.
ARTICLE XII
INDEMNIFICATION
---------------
12.01. Survival. Except as otherwise set forth in
--------
this Section 12.01, the representations and warranties made in
this Agreement or in any agreement, certificate (including the
Seller's Certificate and the Buyer's Certificate) or other
document executed at or prior to the Closing in connection
herewith (an "Ancillary Document") shall survive the Closing and
remain in full force and effect for a period of two years after
the Closing Date and the corresponding obligation to indemnify
under Sections 12.02 (a) and 12.03(a) shall expire at such times
unless a claim has been made prior thereto; provided, however,
-------- -------
that the representations and warranties set forth in Section 3.14
and the covenants and agreements set forth in Section 7.05 shall
remain in full force and effect until the expiration of the
applicable statute of limitations (giving effect to any
extensions or waivers thereof); provided, however, that the sole
-------- -------
remedy for prosecuting any claim for breach of representation
under Section 3.14 with respect to a Tax for which Sellers are
liable under Section 7.05 shall be pursuant to, and in accordance
with Section 7.05. In addition, the representations and
warranties contained in Sections 3.05, 3.06(a), 3.06(b) and 3.11
shall survive forever. The representations and warranties
contained in Section 3.17 shall survive the Closing and remain in
full force and effect for a period of 13 months after the Closing
Date.
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<PAGE> 62
12.02. Indemnification by Merck. Subject to Section
------------------------
12.05, Merck shall indemnify and hold harmless Buyer, its
Affiliates, their respective officers, directors, employees and
agents from and against any and all Losses (net of (x) reserves
and liabilities to the extent included in the Final Closing
Working Capital, and to the extent directly related thereto, and
(y) insurance payments actually received in connection therewith,
less costs of collection), based upon, arising out of, or
resulting from, any of the following:
(a) any breach by Merck of any of the
representations or warranties made by Merck in this Agreement;
(b) any failure by Merck to perform any of its
covenants or agreements contained in this Agreement;
(c) the failure by Merck to pay, perform or
discharge when due any of the Retained Liabilities;
(d) any liability incurred by Buyer with respect
to the assumption of the collective bargaining agreements listed
in Section 2.02(a)(vii) other than in accordance with the terms
of such agreements;
(e) any liability with respect to any
Environmental Matter described in Section 12.07 to the extent
provided in Section 12.07;
(f) any liability or obligation relating to the
operation and ownership of the Kelco Business prior to the
Closing, unless otherwise specifically assumed by Buyer pursuant
to this Agreement; or
(g) any liability or obligation relating to any
employee pension benefit plan (as defined in Section 10.01(b)
hereof) (including any multiemployer pension plan (as defined in
Section 3(37) of ERISA) which arises solely by reason of the
Subsidiaries or the Kelco Business being a member of the
controlled group of companies (as defined in Section 414 of the
Code) that includes any of Sellers.
12.03. Indemnification by Buyer. Subject to
------------------------
Section 12.05, Buyer shall indemnify and hold harmless Merck, its
Affiliates, their respective officers, directors, employees and
agents from and against any and all Losses (net of any tax
benefits and insurance payments actually received in connection
therewith, less costs of collection) based upon or resulting from
any of the following:
(a) any breach by Buyer of any of the
representations or warranties made by Buyer in this Agreement;
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<PAGE> 63
(b) any failure by Buyer to perform any of its
covenants or agreements contained in this Agreement;
(c) the failure by Buyer to pay, perform or
discharge when due any of the Assumed Liabilities; or
(d) any liability or obligation relating to the
operation and ownership of the Kelco Business after the Closing,
unless otherwise specifically assumed by Merck or its Affiliates
pursuant to this Agreement.
12.04. Claims. When a party seeking indemnification
------
under Sections 12.02 or 12.03 (the "Indemnified Party") receives
notice of any claims made by third parties (individually, a
"Third Party Claim" and collectively, "Third Party Claims") or
has any other claim for indemnification other than a Third Party
Claim, which is to be the basis for a claim for indemnification
hereunder, the Indemnified Party shall give prompt written notice
thereof to the other party (the "Indemnifying Party") reasonably
indicating (to the extent known) the nature of such claims and
the basis thereof; provided, however, that failure of the
-------- -------
Indemnified Party to give the Indemnifying Party prompt notice as
provided herein shall not relieve the Indemnifying Party of any
of its obligations hereunder unless and only to the extent that
the Indemnifying Party shall have been prejudiced thereby. Upon
notice from the Indemnified Party, the Indemnifying Party may,
but shall not be required to, assume the defense of any such
Third Party Claim, including its compromise or settlement, and
the Indemnifying Party shall pay all reasonable costs and
expenses thereof and shall be fully responsible for the outcome
thereof; provided, however, that in such case, the Indemnifying
-------- -------
Party shall have no obligation to pay any further costs or
expenses of legal counsel of the Indemnified Party thereafter
incurred in connection with such defense other than reasonable
costs of investigation. No compromise or settlement in respect
of any Third Party Claims may be effected by the Indemnifying
Party without the Indemnified Party's prior written consent
(which consent shall not be unreasonably withheld), unless the
sole relief is monetary damages that are paid in full by the
Indemnifying Party. The Indemnifying Party shall give notice to
the Indemnified Party as to its intention to assume the defense
of any such Third Party Claim within thirty (30) days after the
date of receipt of the Indemnified Party's notice in respect of
such Third Party Claim. If the Indemnifying Party does not,
within thirty (30) days after the Indemnified Party's notice is
given, give notice to the Indemnified Party of its assumption of
the defense of the Third Party Claim, the Indemnifying Party shall be
deemed to have waived its rights to control the defense thereof. If
the Indemnified Party assumes the defense of any Third Party Claim
because of the failure of the Indemnifying Party to do so in
accordance with this Section 12.04, it may do so in such reasonable
manner as it may deem appropriate, and the Indemnifying Party shall
pay all reasonable costs and expenses of such defense. The
Indemnifying Party shall have no liability with respect to any
compromise or settlement thereof effected without its prior written
consent (which consent shall not be unreasonably withheld or
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<PAGE> 64
delayed), unless the sole relief granted was equitable relief for
which it would have no liability or to which it would not be subject.
(b) Notwithstanding the foregoing, with respect
to any Third Party Claim that the Indemnifying Party is
defending, the Indemnified Party shall have the right to retain
separate counsel to represent it and the Indemnifying Party shall
pay the fees and expenses of such separate counsel if the name
parties to any such Third Party Claim include both the
Indemnified Party and Indemnifying Party and it is reasonably
determined that differing defenses are available to the
Indemnified Party and the Indemnifying Party, or there are other
conflicts that in either case make it reasonable for separate
counsel to represent the Indemnified Party and the Indemnifying
Party.
12.05. Limitations on Indemnification. (a) The
------------------------------
provisions for indemnity under Sections 12.02(a) and 12.03(a), as
the case may be, shall be effective only when the aggregate
amount of all Losses for which indemnification is sought from
Seller or Buyer, under Sections 12.02(a) or 12.03(a),
respectively, exceeds $10,000,000, in which case the Indemnified
Party shall be entitled to indemnification of the Indemnified
Party's Losses in excess thereof. The indemnification
obligations of Merck or Buyer pursuant to Sections 12.02(a) or
12.03(a), as the case may be, shall be effective only until the
dollar amount paid by the Indemnifying Party in respect of the
Losses indemnified against under such Sections aggregates to an
amount equal to the Purchase Price.
(b) An Indemnifying Party shall not be liable for
any individual claim under Sections 12.02(a) or 12.03(a) that
does not exceed $25,000.
(c) The provisions of this Article 12 shall not
apply to Losses indemnified pursuant to Section 7.05 (except as
provided in Section 12.01) but shall apply to other Losses with
respect to Taxes.
(d) Each of the parties hereto acknowledges and
agrees that, from and after the Closing, its sole and exclusive
remedy with respect to any and all claims relating to the breach
of representations and warranties contained in this Agreement
shall be pursuant to the indemnification provisions set forth in
this Article XII. In furtherance of the foregoing, each of the
parties hereto hereby waives, to the fullest extent permitted
under applicable law, any and all other rights, claims and causes
of action it may have, from and after the Closing, against the
other party or their respective officers, directors, employees,
agents, representatives and Affiliates relating to the breach of
representations and warranties contained in this Agreement.
(e) The Indemnified Party shall take all
reasonable steps to mitigate damages in respect of any claim for
which it is seeking indemnification and shall use reasonable
efforts to avoid any costs or expenses associated with such claim
and, if such costs and expenses cannot be avoided, to minimize
the amount thereof.
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<PAGE> 65
12.06. Tax Benefits and Costs. (a) Any
----------------------
indemnification payment hereunder shall not be reduced for tax
benefits except as provided in this Section 12.06. The
Indemnified Party shall pay to the Indemnifying Party the amount
of any Tax Benefits attributable to the indemnified Loss when and
to the extent that such Tax Benefits are actually realized by the
Indemnified Party and its Affiliates, determined by comparing the
Indemnified Party's liability for Taxes taking into account the
Loss with the Indemnified Party's liability for Taxes determined
by excluding the Loss.
(b) Any indemnification payment hereunder shall
be treated as an adjustment to the Purchase Price. The
Indemnifying Party shall indemnify the Indemnified Party against
any Loss due to any Taxes imposed with respect to the
indemnification payments (including any payment with respect to
this sentence).
12.07. Environmental Matters. (a) For the purposes
---------------------
of this Section 12.07, "Environmental Matters Previously
Disclosed To Buyer" shall mean all facts, events, conditions,
matters and issues which are not materially different from any of
the facts, events, conditions, matters and issues identified on
the Disclosure Schedule or in any document listed on the
Disclosure Schedule. "Environmental Matters Not Previously
Disclosed To Buyer" shall mean Environmental Matters other than
Environmental Matters Previously Disclosed To Buyer. "Shared
Environmental Costs" shall mean Losses, subject to Section
12.07(c), arising from any Environmental Matter Not Previously
Disclosed To Buyer revealed in the Environmental Assessment that
violated any Environmental Law or Environmental Permit in effect
as of the Closing Date.
(b) On or before the thirtieth day following the
Closing Date, Buyer shall select reputable consultant(s) (subject
to the approval of Merck, which approval shall not be
unreasonably withheld) to conduct at Buyer's sole expense an
environmental assessment of Environmental Matters related to the
Kelco Business (the "Environmental Assessment"). The
Environmental Assessment shall include at Buyer's election such
sampling, research and analysis (including as many phases of
analysis) as is required, in the judgment of such consultant(s),
to reveal the environmental condition of the Kelco Business as of
the Closing Date to the extent not previously disclosed. The
Environmental Assessment shall be completed as soon as
practicable, but in no event later than 13 months following the
Closing Date. Promptly (but in no event more than 60 days) after
completion of the Environmental Assessment, Buyer shall present
to Merck (i) the Environmental Assessment and (ii) a list
describing with specificity Environmental Matters Not Previously
Disclosed To Buyer, if any, which list shall be final and binding
on Buyer.
(c) Buyer, in consultation and cooperation with
Merck, shall have the right to plan and implement in a
commercially reasonable manner any actions required to remediate
Environmental Matters Not Previously Disclosed To Buyer
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("Remedial Actions"). Merck's obligations under this Section
12.07 shall be limited to Shared Environmental Costs.
(d) Shared Environmental Costs arising from
Environmental Matters Not Previously Disclosed to Buyer shall be
borne as follows: (i) 50% by Merck and 50% by Buyer to the
extent such Shared Environmental Costs do not exceed, in the
aggregate, $10,000,000; (ii) 75% by Merck and 25% by Buyer to the
extent such Shared Environmental Costs exceed, in the aggregate,
$10,000,000 and do not exceed, in the aggregate, $25,000,000; and
(iii) 100% by Merck to the extent such Shared Environmental Costs
exceed $25,000,000. Notwithstanding anything to the contrary in
this Agreement, (A) Merck's obligations under this Section 12.07
shall cease, and Merck shall have no obligation for any Shared
Environmental Costs, on or after the tenth anniversary of the
Closing Date, except for Shared Environmental Costs with respect
to any Environmental Matter Not Previously Disclosed To Buyer for
which a Remedial Action has commenced on or prior to the tenth
anniversary of the Closing Date, and (B) except as set forth in
Section 2.02(d)(viii), Merck shall have no obligations with
respect to any Losses or costs of any nature whatsoever based
upon, arising out of or resulting from any Environmental Matter
Previously Disclosed To Buyer. Buyer's portion of any Shared
Environmental Costs shall not count as Losses for purposes of
Section 12.05 hereof.
(e) In the event of a disagreement between Buyer
and Merck regarding the need for or the scope, timing or conduct
of any Remedial Action, Buyer and Merck will each in good faith
attempt to resolve any disagreements on a reasonable basis; any
unresolved disagreement shall promptly be referred to an
independent consultant having expertise in the matter at issue,
mutually acceptable to the parties (or if the parties cannot
agree, the parties shall each select a consultant having
expertise in the matter at issue, and such consultants shall
together select a third consultant having expertise in the matter
at issue who shall be independent from each of the parties and
whose fees and expenses shall be paid equally by the parties),
who shall evaluate the facts and circumstances at issue and shall
recommend a course of action which the independent consultant
believes in his good faith judgment should be taken (but shall
not itself perform such course of action). Such recommendation
shall be final and binding upon the parties.
ARTICLE XIII
MISCELLANEOUS
-------------
13.01. Interpretive Provisions. For purposes of this
-----------------------
Agreement, the Subsidiaries shall be deemed to be Affiliates of
Merck prior to the Closing and Affiliates of Buyer after the
Closing.
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13.02. Entire Agreement. This Agreement (including
----------------
the Disclosure Schedules and all Exhibits and Annexes hereto) and
the Confidentiality Agreement constitute the sole understanding
of the parties with respect to the subject matter hereof.
Matters disclosed by Merck to Buyer pursuant to any Section of
this Agreement shall be deemed to be disclosed with respect to
all Sections of this Agreement.
13.03. Successors and Assigns. The terms and
----------------------
conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties
hereto; provided, however, that this Agreement may not be
-------- -------
assigned by either party without the prior written consent of the
other party, except that Buyer may, at its election, (i) assign
this Agreement, in whole or in part, to Monsanto Company, a
Delaware corporation, or any of its Affiliates so long as such
assignment does not have any adverse consequences to Merck or any
of their Affiliates (including, without limitation, any adverse
tax consequences or any adverse effect on the ability of Buyer to
consummate (or timely consummate) the transactions contemplated
hereby) and (ii) assign its rights under the Agreement after the
Closing to any party that acquires all or substantially all of
the Kelco Business, but no such assignment of this Agreement or
any of the rights or obligations hereunder shall relieve either
party of its obligations under this Agreement.
13.04. Headings. The headings of the Articles,
--------
Sections and paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.
13.05. Modification and Waiver. No amendment,
-----------------------
modification or alteration of the terms or provisions of this
Agreement shall be binding unless the same shall be in writing
and duly executed by the parties hereto, except that any of the
terms or provisions of this Agreement may be waived in writing at
any time by the party which is entitled to the benefits of such
waived terms or provisions. No waiver of any of the provisions
of this Agreement shall be deemed to or shall constitute a waiver
of any other provision hereof (whether or not similar). No delay
on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof.
13.06. Bulk Transfer Laws. Buyer hereby waives
------------------
compliance by Sellers with the provisions of any so-called bulk
transfer law in any jurisdiction in connection with the
transactions contemplated hereby. Sellers shall indemnify Buyer
against any Losses incurred by Buyer as a result of the failure
to comply with such bulk sales laws.
13.07. Expenses. Except as otherwise provided
--------
herein, Merck and Buyer shall each pay all costs and expenses
incurred by it or on its behalf in connection with this Agreement
and the transactions contemplated hereby, including, without
limitation, fees and expenses of its own financial consultants,
accountants and counsel.
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<PAGE> 68
13.08. Third Party Beneficiaries. Nothing in this
-------------------------
Agreement, express or implied, is intended to confer upon any
other person or entity any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
13.09. Notices. Any notice, request, instruction or
-------
other document to be given hereunder by any party hereto to any
other party shall be in writing and shall be given by delivery in
person, by electronic facsimile transmission, cable, telegram,
telex or other standard forms of written telecommunications or by
overnight courier,
if to Merck, to:
Merck & Co., Inc.
One Merck Drive
P. O. Box 100
Whitehouse Station, NJ 08889-0100
Attention: General Counsel
Telecopy: (908) 735-1244
if to Buyer, to:
The NutraSweet Company
Box 730
1751 Lake Cook Road
Deerfield, IL 60015-5239
Attention: General Counsel
Telecopy: (708) 405-7845
with a copy to:
Monsanto Company
800 North Lindbergh Boulevard
St. Louis, MO 63167
Attention: General Counsel
Telecopy: (314) 694-2920
or at such other address for a party as shall be specified by
like notice. The date of giving any such notice shall be the
date of hand delivery, the date sent by electronic facsimile
transmission, cable, telegram, telex or other standard forms of
written telecommunications, or the day after delivery to the
overnight courier service.
13.10. Governing Law. This Agreement shall be
-------------
construed in accordance with and governed by the laws of the
State of New York applicable to agreements made and to be
performed wholly within such jurisdiction. Each of the
parties hereto hereby irrevocably and unconditionally
consents to submit to jurisdiction exclusively in the
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<PAGE> 69
courts of (i) the State of New York and of the United States, or (ii)
the State of Illinois and the United States in the former case located
in County of New York, and in the latter case located in Cook County,
Illinois for any Litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to
commence any Litigation relating thereto except in such courts), and
further agrees that service of any process, summons, notice or
document by U.S. registered mail to its respective address set
forth in Section 13.09 shall be effective service of process for
any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any Litigation arising out of
this Agreement or the transactions contemplated hereby in the
courts of the State of New York, the State of Illinois or the
United States, in each case located in Cook County or 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 Litigation brought in any such court has been brought in
an inconvenient forum.
13.11. Public Announcements. Neither Merck nor Buyer
--------------------
shall make any public statements, including, without limitation,
any press releases, with respect to this Agreement and the
transactions contemplated hereby, without the prior written
consent of the other party (which consent shall not be
unreasonably withheld) except as may be required by applicable
law or by the rules, regulations or practices of the Securities
and Exchange Commission or the New York Stock Exchange. If a
public statement is required to be made pursuant to the foregoing
sentence, the parties shall consult with each other, to the
extent reasonably practicable in advance as to the contents and
timing thereof.
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<PAGE> 70
13.12. Counterparts. This Agreement may be executed
------------
in one or more counterparts, each of which shall for all purposes
be deemed to be an original and all of which shall constitute the
same instrument.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed on its behalf as of the date
first above written.
MERCK & CO., INC.
By: /s/ Judy C. Lewent
-------------------------------
Name: Judy C. Lewent
Title: Senior Vice President and
Chief Financial Officer
THE NUTRASWEET COMPANY
By: /s/ Nick E. Rosa
-------------------------------
Name: Nick E. Rosa
Title: Executive Vice President
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<PAGE> 71
A list briefly identifying the contents of all omitted schedules and
exhibits to the Agreement of Purchase and Sale dated as of December 20,
1994, by and between Merck & Co., Inc., and The NutraSweet Company
(the "Agreement") appears in the Table of Contents to the Agreement.
Monsanto Company will furnish supplementally a copy of any omitted
schedule or exhibit to the Securities and Exchange Commission upon request.
<PAGE> 1
Amendment, dated as of February 15, 1995, to
the Agreement of Purchase and Sale dated as of
December 20, 1994 (the "Purchase Agreement")
between Merck & Co., Inc., a New Jersey corporation
("Merck"), and The NutraSweet Company, a Delaware
corporation ("Buyer"). Capitalized terms used herein
but not otherwise defined have the meanings assigned
such terms in the Purchase Agreement.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Merck and Buyer desire to amend the Purchase Agreement
as provided in this Amendment to, among other things, restructure as an asset
purchase and sale the business of Kelco Specialty Colloids, Ltd.;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions, hereinafter set forth, the parties do hereby agree as follows:
1. The Purchase Agreement is hereby amended as follows:
1.1. Each reference to the word "Agreement" in the Purchase
Agreement (when referring to the Purchase Agreement) shall be followed
by the words and punctuation ", as amended."
1.2. The definition of the Kelco Business in Section 1.01 of the
Purchase Agreement is hereby amended by (i) deleting "MSD IDEA" from,
and adding "Merck Sharp & Dohme IDEA" to, the ninth line of the
definition as provided in the recital to the Purchase Agreement and
(ii) adding (a) ", Kelco Oil Field Group Inc." immediately following
"Merck's Kelco Division" in the seventh line of the definition as
provided in the recital to the Purchase Agreement and (b) "in Canada
through Kelco Specialty Colloids, Ltd.," immediately following "Merck
Sharp & Dohme IDEA, Inc.," in the ninth line of the definition as
provided in the recital to the Purchase Agreement.
1.3. Paragraph (xi) of Subsection (b) of Section 2.01 of the
Purchase Agreement is hereby amended by adding to the end thereof the
following language: "other than Inventory."
1.4. Paragraph (x) of Subsection (a) of Section 2.02 of the
Purchase Agreement is hereby amended by deleting the word "Related"
and replacing it with the word "Retained."
<PAGE> 2
1.5. Article III of the Purchase Agreement is hereby amended
by adding, at the end thereof, the following new Section 3.25:
"3.25. Certain Other Matters. None of the Assets was sold to
---------------------
Bristol-Myers Squibb Company or any of its Affiliates pursuant to
the Agreement of Purchase and Sale, dated as of November 2, 1994,
by and among Merck, Calgon Vestal Laboratories, Inc., CVL
Acquisition Corp. and Bristol-Myers Squibb Company, as amended
(the "B-MS Agreement"). Except as provided in Section 7.06 of this
Agreement, neither Monsanto Company or any of its Affiliates nor
the Kelco Business following the Closing, shall be subject to
Section 7.03(a) of the B-MS Agreement."
1.6. Section 5.01 of the Purchase Agreement is hereby amended by
adding, at the end thereof, the following new Subsection (d):
"Each Seller shall promptly forward or cause to be forwarded
to Buyer any and all proceeds that are received by such Seller
after the Closing Date from accounts receivable relating to the
Kelco Business that arose after the Closing Date."
1.7. Section 5.02(i) of the Purchase Agreement is hereby amended
by adding to the end thereof the following language:
"; provided, further, however, that the Sellers may
-------- ------- -------
consummate the transactions contemplated by paragraph (a)
of Section 7.09."
1.8. Section 5.09 of the Purchase Agreement is hereby deleted in
its entirety and replaced with the following language:
"Within 30 days after the Closing Date, Merck will
take all actions necessary to effect a change in the names
of Kelco Oil Field Group Inc. and Kelco Specialty Colloids,
Ltd. to names reasonably acceptable to Buyer."
1.9. Paragraphs (a), (b) and (c) of Section 7.02 are each hereby
amended by adding at the end of the first sentence of each such
paragraph the following language: "or in any form to which the parties
may subsequently agree."
1.10. Section 7.05 of the Purchase Agreement is hereby amended as
follows:
2
<PAGE> 3
1.10.1. Paragraph (b) shall be amended by deleting "and
7.05(d)" on the second line and replacing it with ", 7.05(d) and
7.09";
1.10.2. Paragraphs (m) and (o) shall be deleted in their
entirety.
1.11. Article VII of the Purchase Agreement is hereby amended by
adding, at the end thereof, the following new Section 7.09:
"7.09 Restructuring.
-------------
(a) The restructuring of the purchase and sale of the
business of Kelco Specialty Colloids, Ltd. ("Colloids") from a
stock purchase and sale to an asset purchase and sale is
hereinafter referred to as the "Restructuring."
(b) Buyer agrees that, notwithstanding any provision to
the contrary contained in this Agreement, no Seller or any
Subsidiary shall be deemed to have breached any representation,
warranty, covenant or agreement made by or to be performed by any
Seller or any Subsidiary to the extent any such breach would not
have occurred if the Restructuring had not occurred.
(c) Buyer shall indemnify and hold harmless each Seller,
each Foreign Subsidiary, the Affiliates of each Seller and each
Foreign Subsidiary, and the respective officers, directors,
employees and agents of each (the "Section 7.09 Indemnified
Parties"), on an after-tax basis in respect of any Taxes incurred
by the Section 7.09 Indemnified Parties to the extent, in the
aggregate, in excess of the Taxes that would have been imposed had
the Restructuring not occurred, including, without limitation, any
Taxes imposed as a result of any Tax audit or similar contest based
upon, arising out of, or resulting from, the Restructuring. Any
indemnity payment made pursuant to this clause (c) shall be
calculated (i) by comparing the cumulative aggregate Tax cost to
the Section 7.09 Indemnified Parties through any given Tax period,
taking into account the Restructuring, with the cumulative aggregate
Tax cost to the Section 7.09 Indemnified Parties through such Tax
period assuming that the Restructuring had not occurred; (ii) by
taking into account the impact of foreign Tax credits arising from
the transaction to the extent actually utilizable by the Section
7.09 Indemnified Parties and including any net detriment that the
Section 7.09 Indemnified Parties suffer on account of the
application of such foreign Tax credits in connection with the
Restructuring; (iii) on an after-tax basis; and (iv) taking into
account any
3
<PAGE> 4
previous indemnity payments made hereunder. Such indemnity payment
shall be paid promptly on written request therefor by Sellers at
any time on or after the date that any Section 7.09 Indemnified
Party suffers any indemnifiable Tax cost attributable to the
Restructuring. If any Tax cost of a Section 7.09 Indemnified
Party that was previously indemnified by Buyer is reduced in a
subsequent period (as a result of the use of foreign Tax credits,
audit adjustments or otherwise), such Section 7.09 Indemnified
Party shall promptly repay the amount of such reduction to Buyer.
(d) Buyer shall indemnify and hold harmless each
Indemnified Party from and against any and all costs or expenses
incurred by such Indemnified Party (on an after-tax basis and after
taking into account any undertaking for payment of such costs or
expenses by Buyer) when compared to the costs and expenses that such
Indemnified Party would have incurred had the Restructuring not
occurred.
(e) The Section 7.09 Indemnified Parties shall not have
any liability or exposure to Buyer, Monsanto or any of their
Affiliates which they would not have had if the Restructuring
had not occurred and Buyer shall indemnify and hold harmless each
Indemnified Party from and against any and all Losses with respect
to the transaction as restructured (including under this Agreement)
which such Indemnified Party would not have incurred had the
Restructuring not occurred.
(f) Notwithstanding any other provision of this Agreement,
the parties agree that each party and each of its Affiliates shall,
for all relevant Tax and other purposes, including, without
limitation all Tax returns, reports, forms and elections, treat
the purchase of the assets of Colloids as a purchase of assets.
1.12. Paragraph (a) of Section 10.04 of the Purchase Agreement is
hereby amended by deleting "the severance policy of Buyer in effect at
the time of such termination" from clause (y) of the second sentence and
adding "the severance policy of Buyer (or of Monsanto Company) in effect
at the time of such termination for employees similarly situated" to the
second sentence immediately following "(y)."
1.13. Paragraph (a) of Section 10.05 is hereby amended by adding
"(or of Monsanto Company)" to the fourth line immediately following "of
Buyer" and to the last line immediately following "Buyer."
1.14. Section 12.01 of the Purchase Agreement is hereby amended by
adding "and Section 7.09" to the ninth line immediately following "7.05."
4
<PAGE> 5
1.15. Paragraph (a) of Section 12.05 of the Purchase Agreement is
hereby amended by adding "other than with respect to any breach of the
representations or warranties contained in Section 3.25" to the second,
fourth and seventh lines thereof immediately following "12.02(a)."
1.16. Paragraph (b) of Section 12.05 of the Purchase Agreement is
hereby amended by adding "other than with respect to any breach of the
representations or warranties contained in Section 3.25" to the second
line thereof immediately following "12.02(a)."
1.17. Paragraph (c) of Section 12.05 of the Purchase Agreement is
hereby amended by adding "or 7.09" to the second line immediately
following "7.05" outside the parenthetical and by adding "or Section
12.06" to the second line immediately following "12.01" inside the
parenthetical.
1.18. Schedules 1, 2 and 3.01 to the Purchase Agreement are hereby
deleted in their entirety and replaced with Schedules 1, 2 and 3.01
attached hereto as Exhibits A, B and C respectively.
1.19. Schedule 3.07 to the Purchase Agreement is hereby amended by
(a) adding the additional copyright registrations listed in Exhibit D
hereto, (b) deleting Application No. 74/245627 for the trademark GELRITE
and (c) adding the foreign trademarks listed in Exhibit E hereto.
1.20. Schedule 3.08 to the Purchase Agreement is hereby amended by
deleting item 113 therefrom.
2. Miscellaneous
-------------
2.1. Except as specifically provided in this Amendment, the
Purchase Agreement shall remain in full force and effect.
2.2. This Amendment may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an original and
all of which shall constitute the same instrument.
2.3. Buyer hereby consents to the transfer and assignment prior
to Closing (a) by Merck of all of its right, title and interest in and
to, all Owned U.S. Real Property, machinery, equipment, vehicles,
fixtures, office furniture, computers, software, tools and other
tangible property of the Kelco Business, in each case located in the
State of California (collectively, the "Drop Down Assets"), to Merck
Holdings Inc. and (b) by Merck Holdings Inc. of all of its right, title
and interest in and to, all of the Drop Down Assets to Kelco Company, a
5
<PAGE> 6
Delaware corporation and a Subsidiary. Sellers shall be responsible for
and shall indemnify Buyer and its Affiliates against any Loss
attributable to any Taxes (including, but not limited to, any
documentary, stamp, sales, excise, or other transfer Taxes or recording
fees) attributable to the transfer and assignment of the Drop Down
Assets to Merck Holdings Inc. and to Kelco Company and the indirect
transfer of such Drop Down Assets to Buyer pursuant to the sale of
Kelco Company to Buyer.
6
<PAGE> 7
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed on its behalf as of the date first above written.
MERCK & CO., INC.
/s/ Judy C. Lewent
By:-----------------------------
Name: Judy C. Lewent
Title: Senior Vice President and
Chief Financial Officer
THE NUTRASWEET COMPANY
/s/ Stephen B. Paige
By:-----------------------------
Name: Stephen B. Paige
Title: Vice President
7
<PAGE> 8
The following is an identification of the contents of all omitted schedules
and exhibits to the Amendment, dated as of February 15, 1995, to the
Agreement of Purchase and Sale dated as of December 20, 1994 between
Merck & Co., Inc., a New Jersey corporation, and The NutraSweet Company,
a Delaware corporation. Monsanto Company will furnish supplementally a copy
of any omitted schedule or exhibit to the Securities and Exchange Commission
upon request.
Schedule 1 Sellers
Schedule 2 Subsidiaries
Schedule 3.01 Capital Stock of Subsidiaries;
Equity Interests of
Subsidiaries
Exhibit D Kelco Copyrights
Exhibit E Kelco Foreign Trademarks
