Exhibit 9
PARTICIPATION AGREEMENT dated August 16, 1999
(hereinafter, this "AGREEMENT"), between SMITHKLINE
XXXXXXX plc, a public limited company organized under
the laws of England ("SB"), and QUEST DIAGNOSTICS
INCORPORATED, a Delaware corporation ("QUEST").
WHEREAS, SB, SmithKline Xxxxxxx Corporation, a Pennsylvania
corporation and wholly owned subsidiary of SB, and Quest have entered into a
Stock and Asset Purchase Agreement, dated as of February 9, 1999 and amended as
of the date hereof (the "STOCK AND ASSET PURCHASE AGREEMENT"), pursuant to which
SB has agreed to sell, and Quest has agreed to purchase, SB's clinical
laboratories business, including 100% of the outstanding capital stock of SBCL,
Inc., a Delaware corporation, and certain other assets, as further described
therein.
WHEREAS, SB and Quest have entered into the Category Three
Data Access Agreement dated as of the date hereof (the "DATA ACCESS AGREEMENT").
WHEREAS, SB intends to form a company ("IX COMPANY") that may,
among other activities, use the laboratory data to be received from Quest
pursuant to the Data Access Agreement, together with other health care related
data, to develop, market and sell products and services under Category Three
Uses (as such term is defined in the Data Access Agreement).
WHEREAS, SB wishes to cause IX Company to grant Quest an
initial 29.5% nonvoting equity interest in IX Company on the terms and subject
to the conditions of this Agreement.
WHEREAS, Quest wishes to accept the initial 29.5% nonvoting
equity interest in IX Company on the terms and subject to the conditions of this
Agreement, to become a significant investor in IX Company and to work with SB
and IX Company to further IX Company's interests.
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NOW, THEREFORE, for the consideration and the agreements and
covenants set forth in the Data Access Agreement and the mutual agreements and
covenants set forth below, SB and Quest hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01. DEFINITIONS. (a) For purposes of this agreement,
the following terms used herein have the following meanings:
"AFFILIATE" means, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by, or is under common
control with, the specified Person. For purposes of this definition, the term
"CONTROL" as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management of
that Person whether through ownership of voting securities or otherwise.
"APPLICABLE LAW" means, with respect to any jurisdiction, all
applicable statutes, laws, ordinances, rules, orders and regulations (to the
extent then in force and effect) of any federal, state, local or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, having authority over an applicable Person in such jurisdiction.
"APPLICABLE PERIOD" means the period that begins on the
Formation Date and ends on the earlier of (i) the date that is the 10-year
anniversary of the Formation Date and (ii) the date on which the Quest Members
beneficially own Units representing an aggregate Percentage Interest of less
than 10%; PROVIDED that the Applicable Period shall be reinstated if at any time
prior to the 10-year anniversary of the Formation Date the Quest Members
beneficially own Units representing an aggregate Percentage Interest of 10% or
more; PROVIDED FURTHER that in no event shall the Applicable Period continue
past the date that is the 10-year anniversary of the Formation Date.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which banks are required or authorized by law to be closed in the
City of New York.
"COMMISSION" means the Securities and Exchange Commission.
"COMPETITIVE LABORATORY COMPANY" means any Person that
derives, directly or indirectly through its Affiliates, more than $500,000,000
in gross revenues in any fiscal year (determined in accordance with GAAP) from
clinical laboratory, anatomic pathology or other diagnostics testing services
(including, without limitation, routine and esoteric clinical laboratory
services (including genetics testing), clinical laboratory
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services involved with clinical trials, point-of-care testing, clinical
laboratory services involving corporate healthcare and services involved with
managing hospital laboratories) including the reports of test results, but
excluding any gross revenues derived from providing, in any manner, directly or
indirectly, data or information products or services which substantially consist
of laboratory data (other than initial reporting of laboratory test results).
"GAAP" means generally accepted accounting principles in the
United States.
"GOVERNMENTAL ENTITY" means any Federal, state, local or
foreign government or any court of competent jurisdiction, administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"MEMBER" means any Person who holds Units.
"PERCENTAGE INTEREST" means, with respect to any Person at a
specified time, such Person's proportionate equity ownership interest in all
issued and outstanding Units of IX Company, expressed as a percentage, as
represented by the Units held by such Person at such time and excluding any
Preference Securities held by such Person.
"PERSON" means any individual, firm, corporation, partnership,
limited partnership, limited liability company, trust, joint venture, government
entity or other entity.
"PHARMACEUTICAL BUSINESS" means the discovery, development,
manufacture, marketing or distribution of pharmaceutical or vaccine products.
"PHARMACEUTICAL COMPANY" means a Person that derives, directly
or indirectly from its Affiliates, more than $500,000,000 in gross revenues in
any fiscal year (determined in accordance with GAAP) from one or more
Pharmaceutical Businesses.
"QUEST DIRECTOR" means a Director designated by Quest pursuant
to Section 4.02.
"QUEST MEMBER" means Quest if it is a Member and any Affiliate
of Quest that is a Member.
"SECURITIES ACT" means the Securities Act of 1933 and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"THIRD PARTY" means any Person other than SB, Quest, IX
Company or any of their respective Affiliates.
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(b) The following terms have the meanings set forth in the
Sections set forth below:
Term Location
---- --------
Additional Preference Securities.................................... 2.05(b)
Additional Quest Preference Securities.............................. 2.05(b)
Additional Quest Securities......................................... 2.05(b)
Additional Quest Units.............................................. 2.05(a)
Additional Securities............................................... 2.05(b)
Additional Units.................................................... 2.05(a)
Agreement........................................................... Preamble
Board............................................................... 4.01(a)
Closing............................................................. 2.08(a)
Closing Date........................................................ 2.08(a)
Constitutive Documents.............................................. 2.03(a)
Data Access Agreement............................................... Preamble
Data Access Agreement Assignment.................................... 2.08(b)
Directors........................................................... 4.01(a)
DOJ................................................................. 2.06
Dragalong Member.................................................... 5.04
Formation Date...................................................... 2.02(a)
FTC................................................................. 2.06
Funding Loans....................................................... 3.03
Indemnified Person.................................................. 7.14(a)
IPO Date............................................................ 2.04(d)
IX Company.......................................................... Preamble
IX Company Joinder.................................................. 2.07
Measurement Date.................................................... 2.05(c)
New Investor........................................................ 2.05(a)
Nonvoting Units..................................................... 2.04(d)
Offer Notice........................................................ 2.05(a)
Offered Amount...................................................... 5.05
Offeror............................................................. 5.02(a)
Preference Securities............................................... 2.04(g)
Preference Security Purchase Right.................................. 2.05(b)
Purchase Agreement.................................................. 5.04
Purchase Rights..................................................... 2.05(b)
Purchaser........................................................... 5.04
Qualifying Third Party Investment................................... 3.02(c)
Quest............................................................... Preamble
Quest Interest...................................................... 2.02(b)
Registration Rights................................................. 5.08
Representatives..................................................... 7.12(a)
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SB.................................................................. Preamble
Stock and Asset Purchase Agreement.................................. Preamble
Tagalong Member..................................................... 5.05
Tagalong Offer...................................................... 5.05
Transfer............................................................ 5.01
Transfer Notice..................................................... 5.02(a)
Transfer Offer...................................................... 5.02(a)
Transfer Securities................................................. 5.02(a)
Unit Purchase Right................................................. 2.05(a)
Units............................................................... 2.04(a)
Voting Units........................................................ 2.04(c)
ARTICLE II
FORMATION OF IX COMPANY AND GRANT OF QUEST INTEREST
SECTION 2.01. FORMATION OF IX COMPANY. Subject to the terms
and conditions of this Agreement, SB hereby agrees to cause IX Company to be
formed on or prior to the Closing Date (as defined below). SB currently
contemplates causing IX Company to be formed as a limited liability company
under Delaware law; provided that SB may cause IX Company to be formed as any
type of entity that XX xxxxx appropriate, including a corporation, limited
partnership, limited liability partnership or limited liability company, and in
any jurisdiction which XX xxxxx appropriate. If SB believes that it would be
advantageous to do so, and not disadvantageous to IX Company (for this purpose,
the two entities taken as a whole), it may elect to form two entities to conduct
IX Company's business, one organized in the United States and the other
organized offshore. SB and Quest each would be granted interests in both
entities identical to their respective interests provided for in Section 2.02
and this Agreement would apply equally to both entities.
SECTION 2.02. GRANT OF SB AND QUEST INTERESTS. (a) On the date
on which IX Company is formed pursuant to Section 2.01 (the "FORMATION DATE")
and in consideration for the capital contributions to be made by SB and its
Affiliates pursuant to Section 3.01, SB and/or any Affiliates designated by SB
collectively shall be issued by IX Company Voting Units representing a 100%
Percentage Interest in IX Company as of the Formation Date and before giving
effect to the grant of the Quest Interest (as defined below) on the Closing Date
pursuant to Section 2.02(b).
(b) Subject to the terms and conditions of this Agreement and
without any consideration from Quest other than the consideration and the
agreements and covenants set forth in the Data Access Agreement and the
agreements and covenants set forth in this Agreement, SB hereby agrees to cause
IX Company on the Closing Date to grant to Quest, or any Affiliate of Quest
designated by Quest in writing at least 10 Business Days in advance of the
Closing Date, Nonvoting Units (as defined below) in IX Company
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representing an initial 29.5% Percentage Interest (such Nonvoting Units,
together with any other Units or Preference Securities acquired by Quest or an
Affiliate of Quest during the Applicable Period, the "QUEST INTEREST") and Quest
hereby agrees to cause the Quest Members to accept such Nonvoting Units and to
assume as of the Closing Date all the customary obligations of a Member of IX
Company to the same extent SB accepts such customary obligations in its capacity
as a Member of IX Company; PROVIDED that, subject to Section 7.14, the Quest
Members shall have customary limited liability for IX Company's obligations and
shall have no obligation to make capital contributions to IX Company.
(c) Notwithstanding Quest's beneficial ownership of the Quest
Interest, each of Quest and its Affiliates may sell or license laboratory data
or information products or services to any Person Quest or any one of its
Affiliates chooses and invest in any Person that uses or distributes laboratory
data of Quest or any other Person.
SECTION 2.03. CONSTITUTIVE DOCUMENTS. (a) The organizational
and other constitutive documents of IX Company (the "CONSTITUTIVE DOCUMENTS")
shall be in the form determined by the holders of a majority of the voting power
represented by the Voting Units, in their sole discretion, and may be amended
from time to time in the manner provided in the applicable Constitutive
Documents, PROVIDED that, without Quest's written consent, the Constitutive
Documents, as amended from time to time, shall not, at the time of their
adoption or such amendment, diminish any rights granted to Quest hereunder or be
reasonably anticipated to result in the diminishment of any of the material
rights granted to Quest hereunder. Quest agrees to execute and deliver
counterparts to the Constitutive Documents on the Closing Date.
(b) IX Company shall in a timely manner provide to Quest
copies of the Constitutive Documents and each amendment thereto.
(c) So long as the Constitutive Documents comply (and after
any amendments thereto, shall comply) with Section 2.03(a), Quest promptly shall
provide IX Company, upon written request from IX Company, with any approvals of
the Constitutive Documents, including of any amendments thereto, as from time to
time shall be required under the terms of the Constitutive Documents and
Applicable Law.
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SECTION 2.04. CAPITALIZATION. Prior to the IPO Date (as
defined below), the Constitutive Documents shall provide, consistent with the
type of entity in which IX Company is then organized and Applicable Law, that:
(a) subject to all the rights, powers and preferences of
holders of the Preference Securities provided for in Section 2.04(g),
IX Company's common equity shall be divided into units ("UNITS") each
of which shall entitle its holder (i) to an equal pro rata share in the
profits and distributions (in cash, securities or property) of IX
Company that IX Company, in its sole discretion, may determine to
distribute to holders of Units; PROVIDED that no distributions shall be
made on any class or series of Units unless such distribution is made
on all classes and series of Units; and (ii) upon IX Company's
voluntary or involuntary liquidation, dissolution or winding up, to an
equal pro rata share in the net assets of IX Company available for
distribution to the holders of Units;
(b) subject to Section 2.04(a), the Units shall be divided
into two or more classes, with the Units comprising each class (i)
entitling all the holders of such Units to such voting powers and
governance and other rights (including rights, if any, to convert into
another class of Units) and (ii) being subject to such qualifications,
limitations, obligations and restrictions, as determined by IX Company,
in its sole discretion, at the time IX Company establishes and
designates such class;
(c) on the Formation Date, IX Company shall have established
and designated at least one class of Units ("VOTING UNITS") which Units
shall entitle their holders (i) to vote generally for the election of
Directors (as defined below), other than any Director which another
class or classes of Units or Preference Securities is entitled to
designate, and (ii) to vote generally on all other matters relating to
IX Company requiring the action of IX Company's Members;
(d) on the Formation Date, IX Company shall have established
and designated at least one class of Units ("NONVOTING UNITS") which
Units shall not entitle their holders to any voting rights, including
any right to vote generally for the election of Directors or to vote
generally on any other matters relating to IX Company, except for such
matters on which holders of Units of such class are entitled to vote as
a matter of Applicable Law; each Nonvoting Unit shall be automatically
converted into one Voting Unit immediately prior to the date on which
IX Company effects an initial public offering of Voting Units
registered under the Securities Act (the "IPO DATE");
(e) IX Company at any time (i) may establish and designate one
or more additional classes of Units consistent with this Section 2.04
and (ii) subject to Section 4.03(b), may issue Units of such class or
classes, as well as Voting Units and Nonvoting Units, in such
quantities and at such times as IX Company shall determine in its sole
discretion;
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(f) the holders of Units shall not have any preemptive rights
to subscribe for any Units of any class whether now or hereafter
authorized, established or designated; and
(g) IX Company at any time (i) may establish and designate one
or more classes of securities having such powers, preferences and
relative rights and any qualifications, limitations, obligations and
restrictions as IX Company may determine in its sole discretion
("PREFERENCE SECURITIES") and (ii) subject to Section 4.03(b), may
issue Preference Securities in such quantities and at such times as IX
Company shall determine in its sole discretion.
SECTION 2.05. QUEST PURCHASE RIGHTS. (a) Subject to the terms
and conditions of this Agreement but notwithstanding Section 2.04(f), IX Company
will not issue Units of any class ("ADDITIONAL UNITS") at any time prior to the
IPO Date (including pursuant to Section 3.02) to any Person other than Quest or
one of its Affiliates (a "NEW INVESTOR") unless it first offers Quest in writing
(an "OFFER NOTICE") the right to also purchase, for a purchase price determined
in accordance with Sections 2.05(c), (d) and (e), up to that number of
additional Nonvoting Units ("ADDITIONAL QUEST UNITS") so that the Percentage
Interest of the Quest Members immediately after giving effect to the proposed
issuance of the Additional Units and all of the offered Additional Quest Units
will be equal to the Percentage Interest of the Quest Members immediately prior
to giving effect to the proposed issuances of the Additional Units and all of
the offered Additional Quest Units (the "UNIT PURCHASE RIGHT"). Quest's right to
purchase any of the Additional Quest Units shall be subject to the consummation
of IX Company's issuance of the Additional Units to the New Investor.
(b) Subject to the terms and conditions of this Agreement but
notwithstanding Section 2.04(f), IX Company will not issue Preference Securities
of any class ("ADDITIONAL PREFERENCE SECURITIES" and, together with Additional
Units, "ADDITIONAL SECURITIES") at any time prior to the IPO Date (including
pursuant to Section 3.02) to a New Investor unless it first delivers to Quest an
Offer Notice describing Quest's right to also purchase, for a purchase price
determined in accordance with Sections 2.05(c), (d) and (e), up to that number
of additional Preference Securities of such class ("ADDITIONAL QUEST PREFERENCE
SECURITIES" and, together with Additional Quest Units, "ADDITIONAL QUEST
SECURITIES") equal to the product of (i) the aggregate Percentage Interests of
the Quest Members as of such time and (ii) the quotient of (A) the number of
Additional Preference Securities proposed to be issued divided by (B) the
aggregate Percentage Interests as of such time of all the Members other than the
Quest Members (the "PREFERENCE SECURITY PURCHASE RIGHT"; the Unit Purchase Right
and the Preference Security Purchase Right are referred to herein collectively
as the "PURCHASE RIGHTS"). Quest's right to purchase any of the Additional Quest
Preference Securities shall be subject to IX Company's issuance of the
applicable Additional Preference Securities to the New Investor.
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(c) For each Additional Quest Security (or fraction thereof)
that Quest purchases pursuant to Section 2.05(a) or (b), Quest shall pay a cash
purchase price (in U.S. dollars) per each such security equivalent to the
economic value paid (in cash or other consideration) per each applicable
Additional Security purchased by the New Investor. Equivalent economic value for
purposes of this Section 2.05(c) shall be measured as of the date on which the
sale of the applicable Additional Securities is consummated unless IX Company
and the New Investor enter into a binding written agreement with respect to the
sale of such Additional Securities, in which case equivalent economic value
shall be measured as of the date of such agreement (subject to any adjustment
provided in such agreement) (such date on which equivalent economic value is
measured, the "MEASUREMENT DATE").
(d) Noncash consideration paid by a New Investor for
Additional Securities shall be valued for purposes of Section 2.05(c) at its
fair market value as mutually agreed in good faith by Quest and IX Company, or,
if Quest and IX Company cannot agree on such value within five Business Days of
the Measurement Date, by a mutually agreed internationally recognized investment
banking firm. Quest and IX Company shall cause any such valuation to be made as
promptly as reasonably possible and in any event not later than 20 Business Days
from the Measurement Date and shall share equally the fees and expenses of such
investment banking firm.
(e) Quest shall not be entitled in connection with its
purchase of Additional Quest Securities to the benefit of any non-economic terms
related to IX Company's sale of Additional Securities, including additional
voting or governance rights, or to require the modification of any of the terms
and conditions of the Data Access Agreement.
(f) Not less than three Business Days prior to the Measurement
Date with respect to a proposed issuance of Additional Securities, IX Company
shall provide Quest, subject to Section 7.12, with an Offer Notice setting forth
(i) the name of the applicable New Investor, (ii) the number and class or series
of such Additional Securities that IX Company proposes to issue, (iii) the
proposed purchase price for each such Additional Security, or if the
consideration is non-cash, the estimated value of such consideration per each
such Additional Security, (iv) the form of the consideration to be paid by the
New Investor for such Additional Securities and (v) the other terms and
conditions of the New Investor's proposed purchase of such Additional
Securities. IX Company also shall provide Quest, subject to Section 7.12, with
any information provided by IX Company to the New Investor in connection with
the New Investor's proposed investment in such Additional Securities at
substantially the same time such information is given to the New Investor.
(g) Quest shall have ten Business Days from the date on which
it receives an Offer Notice to elect to exercise its applicable Purchase Right
to purchase all or a portion of the Additional Quest Securities offered to it
pursuant to Section 2.05(a) or (b); PROVIDED that if Quest properly elects to
exercise its Purchase Right and the economic
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consideration to be received by IX Company from the New Investor in return for
the Additional Securities is more favorable to IX Company, without regard to
appreciation or depreciation of the value of the specified consideration, than
the economic consideration described in the applicable Offer Notice, IX Company
promptly shall provide Quest with written notice of such revised economic
consideration and Quest shall have five Business Days from the date on which it
receives such written notice in which to rescind its election to exercise its
Purchase Right. If Quest does not elect to exercise its Purchase Right or, if it
rescinds its election to exercise its Purchase Right pursuant to the preceding
sentence, IX Company shall have 30 days in which (i) to issue the Additional
Securities or (ii) to enter into a binding written agreement with the New
Investor, subject to customary closing conditions, to issue the Additional
Securities to the New Investor; PROVIDED that the economic consideration to be
received by IX Company for such Additional Securities shall not be meaningfully
(i.e., 5% or more) less favorable to IX Company, without regard to appreciation
or depreciation of the value of the specified consideration, than the economic
consideration described in the Offer Notice or revised notice, as applicable. If
IX Company does not issue the Additional Securities or enter into a binding
written agreement to do so within such 30-day period, IX Company shall no longer
be permitted to issue such Additional Securities without again fully complying
with this Section 2.05.
(h) The closing of any purchase by Quest of Additional Quest
Securities shall occur concurrently with the issuance of the applicable
Additional Securities if reasonably practicable or otherwise within five
Business Days after the later of (1) the date of the issuance of such Additional
Securities and (2) delivery of notice by Quest electing to exercise its Purchase
Right, PROVIDED that if Quest and IX Company have not agreed on the value of any
noncash consideration paid by a New Investor for Additional Securities prior to
such time for closing, the closing shall be postponed until the fifth Business
Day after the date on which such value is determined pursuant to Section
2.05(d).
(i) This Section 2.05 shall terminate and be deemed deleted
from this Agreement on the earlier of (i) the IPO Date and (ii) the date on
which Quest Members beneficially own Units representing an aggregate Percentage
Interest of less than 5%.
SECTION 2.06. HSR. Each of SB and Quest shall as promptly as
practicable, but in no event later than ten Business Days following the
execution and delivery of this Agreement, file with the United States Federal
Trade Commission (the "FTC") and the United States Department of Justice (the
"DOJ") the notification and report form, if any, required for the transactions
contemplated by Sections 2.01, 2.02 and 3.01 and any supplemental information
requested in connection therewith pursuant to the HSR Act. Each of SB and Quest
shall furnish to the other such necessary information and reasonable assistance
as the other may request in connection with the preparation of any filing or
submission that is necessary under the HSR Act. SB and Quest shall keep each
other appraised of the status of any communications with, and any inquiries or
requests for additional information from, the FTC and DOJ and shall comply
promptly
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with any such inquiry or request. Each of SB and Quest shall use its reasonable
best efforts to obtain any clearance required under the HSR Act for consummation
of the transactions contemplated by Sections 2.01, 2.02 and 3.01.
SECTION 2.07. RATIFICATION BY IX COMPANY. SB shall cause IX
Company to deliver to Quest at Closing a joinder (the "IX COMPANY JOINDER")
pursuant to which IX Company accepts and agrees to the terms and conditions of
this Agreement, assumes IX Company's obligations hereunder and agrees to become
a party hereto.
SECTION 2.08. CLOSING. (a) Subject to the terms and conditions
of this Agreement, the transactions contemplated by Section 2.02(b) of this
Agreement shall take place at a closing (the "CLOSING") to be held at the
offices of Cravath, Swaine & Xxxxx, Xxxxxxxxx Xxxxx, 000 Xxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx at 10:00 a.m. New York time on the fifth Business Day following
the later to occur of the (i) expiration or termination of all applicable
waiting periods under the HSR Act, if any, and (ii) satisfaction or waiver of
all other conditions to the obligations of the parties set forth in Section
2.08(b), or at such other place or at such other time or on such other date as
SB and Quest may mutually agree upon in writing (the day on which the Closing
takes place being the "CLOSING DATE").
(b) (i) The obligation of Quest to consummate the transactions
contemplated by Section 2.02(b) of this Agreement is subject to the satisfaction
of the following conditions:
(A) The representations and warranties of SB shall be true and
correct in all material respects, as of the date hereof and as of the
time of the Closing as though made as of such time, except to the
extent such representations expressly relate to an earlier date (in
which case such representations and warranties shall be true and
correct in all material respects on and as of such earlier date). SB
shall have complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with
by SB by the time of the Closing. SB shall have delivered to Quest a
certificate dated as of the Closing Date and signed by an officer of SB
confirming the foregoing.
(B) No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunction or
other order enacted, entered, promulgated, enforced or issued by any
Governmental Entity or other legal restraint or prohibition preventing
the transactions contemplated by Sections 2.01, 2.02 or 3.01 of this
Agreement shall be in effect.
(C) The waiting period under the HSR Act, if any, applicable
to the transactions contemplated by Sections 2.01, 2.02 or 3.01 of this
Agreement shall have expired or been terminated.
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(D) IX Company shall have provided written evidence to Quest
that IX Company has granted to Quest the Quest Interest.
(E) SB shall have caused IX Company to execute and deliver to
Quest the IX Company Joinder.
(F) Each of SB and IX Company shall have executed and
delivered to the other, with a copy to Quest, an assignment and
assumption agreement (the "DATA ACCESS AGREEMENT ASSIGNMENT") pursuant
to which SB shall have assigned its rights and obligations under the
Data Access Agreement to IX Company and IX Company shall have assumed
such rights and obligations in a manner consistent in all material
respects with Section 10.01(a) of the Data Access Agreement.
(ii) The obligation of SB to consummate the transactions
contemplated by Sections 2.01, 2.02 and 3.01 of this Agreement is subject to the
satisfaction of the following conditions:
(A) The representations and warranties of Quest shall be true
and correct in all material respects, as of the date hereof and as of
the time of the Closing as though made as of such time, except to the
extent such representations expressly relate to an earlier date (in
which case such representations and warranties shall be true and
correct in all material respects on and as of such earlier date). Quest
shall have complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with
by Quest by the time of the Closing. Quest shall have delivered to SB a
certificate dated as of the Closing Date and signed by an officer of
Quest confirming the foregoing.
(B) No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunction or
other order enacted, entered, promulgated, enforced or issued by any
Governmental Entity or other legal restraint or prohibition preventing
the transactions contemplated by Sections 2.01, 2.02 and 3.01 of this
Agreement shall be in effect.
(C) The waiting period under the HSR Act, if any, applicable
to the transactions contemplated by Sections 2.01, 2.02 and 3.01 of
this Agreement shall have expired or been terminated.
(D) Quest shall have delivered to SB and IX Company an
executed counterpart to the Constitutive Documents.
(E) Quest shall have executed and delivered to SB and IX
Company a written acknowledgment and agreement to the Data Access
Agreement Assignment, including a release of SB from any obligations
under the Data
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Access Agreement consistent in all material respects with Section
10.01(a) of the Data Access Agreement.
(c) On the terms and subject to the conditions of this
Agreement, each party shall use its reasonable best efforts to cause the Closing
to occur as soon as reasonably practicable, including taking all reasonable
actions necessary to comply promptly with all legal requirements that may be
imposed on it or any of its Affiliates with respect to the Closing. Without
limiting the foregoing or the provisions set forth in Section 2.06, SB and Quest
shall use their respective reasonable best efforts to cause the Closing to occur
on or prior to February 15, 2000.
(d) Either party may terminate this Agreement if the Closing
has not occurred on or before August 15, 2000.
ARTICLE III
CAPITAL CONTRIBUTIONS AND FUNDING
SECTION 3.01. INITIAL CONTRIBUTION OF ASSETS. (a) Within 60
days following the Closing Date, SB shall cause to be contributed to IX Company
the assets described in Annex A, subject to the liabilities described in Annex
A.
(b) Contributions made prior to the one-year anniversary of
the date hereof by SB and its Affiliates to IX Company of property other than
cash, which property is owned by SB or an Affiliate of SB as of the date hereof,
shall be deemed to have been made by SB and its Affiliates in consideration for
the Voting Units to be issued to or on behalf of SB pursuant to Section 2.02(a),
and SB and its Affiliates shall not be entitled to any additional consideration
for such contributions.
(c) Contributions pursuant to this Section 3.01 (i) in the
aggregate shall not reduce IX Company's net worth and (ii) shall not result in
IX Company assuming any indebtedness for money borrowed or intercompany payables
due to SB.
SECTION 3.02. ADDITIONAL CAPITAL CONTRIBUTIONS. (a) Subject to
Section 3.02(b), IX Company may from time to time request that one or more of
its Members make capital contributions to IX Company in consideration for the
issuance to such Members of additional Units and/or Preference Securities;
PROVIDED that, except as otherwise expressly provided in this Article III,
neither SB, Quest nor any of their Affiliates shall be obligated to make any
capital contributions to IX Company or to otherwise fund the operations of IX
Company. Subject to Sections 2.05 and 3.02(b), any capital contributions made to
IX Company by a Member shall be made on such terms and conditions as IX Company
and such Member shall agree in their sole discretion.
14
(b) Except as otherwise expressly provided in this Article
III, so long as IX Company is an Affiliate of SB, neither SB nor its Affiliates
shall make additional capital contributions to IX Company prior to the IPO Date,
nor shall IX Company issue Units and/or Preference Securities to SB or any of
its Affiliates (other than pursuant to a pro rata distribution in kind of Units
and/or Preference Securities to IX Company's Members) prior to the IPO Date.
(c) Notwithstanding Section 3.02(b), at any time prior to the
IPO Date when a Third Party is purchasing Units and/or Preference Securities of
IX Company in exchange for cash or noncash consideration having a value of
$25,000,000 or more (a "QUALIFYING THIRD PARTY INVESTMENT") and including during
the 30-day period after the date of a Qualifying Third Party Investment,
(i) IX Company may issue Units and/or Preference Securities to
SB and/or its Affiliates and SB and/or its Affiliates may purchase such
Units and/or Preference Securities; and
(ii) SB shall have the option to convert all or a portion of
the then outstanding Funding Loans (as defined below), and any accrued
and unpaid interest thereon, into Voting Units and/or Preference
Securities;
PROVIDED that such purchase shall be of the same class and series as the
Preference Securities purchased by the Third Party or if the Third Party
purchased Units, or Voting Units, and the purchase price paid (in cash or other
consideration, including by the conversion of Funding Loans and any accrued and
unpaid interest thereon) by SB and/or any of its Affiliates for any such Units
and/or Preference Securities shall have an economic value per Unit or Preference
Security equivalent to the economic value per Unit or Preference Security paid
(in cash or other consideration) by such Third Party for the Units and/or
Preference Securities that the Third Party purchases in such Qualifying Third
Party Investment. Equivalent economic value for purposes of this Section 3.02(c)
shall be measured as of the date such Qualifying Third Party Investment is
consummated.
(d) Notwithstanding Section 3.02(b), on or immediately prior
to the IPO Date,
(i) IX Company may issue Units to SB and/or its Affiliates and
SB and/or its Affiliates may purchase such Units; and
(ii) SB shall have the option to convert all or a portion of
the then outstanding Funding Loans, and any accrued and unpaid interest
thereon, into Voting Units;
PROVIDED that the purchase price paid (in cash or other consideration, including
by the conversion of Funding Loans and any accrued and unpaid interest thereon)
by SB and/or any of its Affiliates for any such Units shall have an economic
value per Unit equivalent to the initial public offering price per Unit (less
any underwriting discounts paid by
15
IX Company) received by IX Company in the initial public offering of its Units.
Equivalent economic value for purposes of this Section 3.02(d) shall be measured
as of the IPO Date.
(e) Notwithstanding Section 3.02(b) but subject to Section
3.01(b), during the Applicable Period IX Company may issue Units and/or
Preference Securities to SB and/or its Affiliates and SB and/or its Affiliates
may purchase such Units and/or Preference Securities in consideration for the
contribution to IX Company of property and other noncash consideration, PROVIDED
that such consideration is valued as of the date of its contribution in
accordance with Section 3.02(f) and that such Units and/or Preference Securities
are valued as of the same date in accordance with Section 3.02(g).
(f) Noncash consideration paid by SB or its Affiliates or by a
Third Party for Units and/or Preference Securities shall be valued for purposes
of this Section 3.02 at the fair market value of such consideration as mutually
agreed in good faith by SB and the holders (other than SB and its Affiliates) of
a majority of the voting power represented by the Voting Units and Nonvoting
Units (assuming for this purpose that each Nonvoting Unit is entitled to one
vote) or, if SB and such holders are in disagreement on or after the fifth
Business Day following the date IX Company requests in writing the valuation of
such consideration, by an internationally recognized investment banking firm
mutually agreed in good faith by SB and such holders. SB, Quest and IX Company
shall use commercially reasonable efforts to cause any such valuation to be made
as promptly as possible. IX Company shall pay all fees and expenses of such
investment banking firm. The non-economic terms of a Person's investment in IX
Company, including such Person's rights with respect to the management and
governance of IX Company, shall not be taken into consideration in the valuation
of the economic consideration paid by such Person for Units and/or Preference
Securities for purposes of this Section 3.02.
(g) Units and Preference Securities to be issued to SB or its
Affiliates for noncash consideration shall be valued at their fair market value
as mutually agreed in good faith by SB and the holders (other than SB and its
Affiliates) of a majority of the voting power represented by the Voting Units
and Nonvoting Units (assuming for this purpose that each Nonvoting Unit is
entitled to one vote) or, if SB and such holders are in disagreement on or after
the fifth Business Day following the date IX Company requests in writing the
valuation of such Units and/or Preference Securities, by an internationally
recognized investment banking firm mutually agreed in good faith by SB and such
holders. SB, Quest and IX Company shall use commercially reasonable efforts to
cause any such valuation to be made as promptly as possible. IX Company shall
pay all fees and expenses of such investment banking firm.
SECTION 3.03. FUNDING OF IX COMPANY. SB in its sole discretion
may choose (but shall not have any obligation) to fund, directly or indirectly
through an Affiliate of SB, the operations of IX Company. Prior to the earlier
of (i) the date on which SB ceases to be an Affiliate of IX Company and (ii) the
IPO Date, such funding
16
initially shall be in the form of loans ("FUNDING LOANS") providing for interest
not to exceed the annual rate of interest quoted from time to time by Citibank
N.A. as its prime rate in New York, plus two percent per annum. Funding Loans
shall be repayable upon demand, together with all accrued and unpaid interest
thereon; PROVIDED that SB may not demand repayment of any Funding Loan prior to
the IPO Date.
ARTICLE IV
MANAGEMENT OF IX COMPANY
SECTION 4.01. MANAGEMENT OF IX COMPANY. (a) IX Company shall
be managed on behalf of the holders of equity interests in IX Company by a board
of directors (the "BOARD") comprised of such number of members ("DIRECTORS") as
the holders of a majority of the voting power represented by the Voting Units
shall determine in accordance with the Constitutive Documents and Applicable
Law. Subject to Section 4.02, the Directors shall be designated by the holders
of a majority of the voting power represented by the Voting Units in the manner
set forth in the Constitutive Documents.
(b) Notwithstanding the foregoing Section 4.01(a), IX Company
may grant other Members in IX Company (other than a Competitive Laboratory
Company) such governance rights as IX Company shall determine in its sole
discretion.
(c) The Board, in its sole discretion, from time to time (i)
may appoint officers, who may be (but shall not be required to be) employees of
IX Company, any Member or any Affiliate of a Member, to manage the operations of
IX Company on a day-to-day basis subject to the supervision of the Board or (ii)
may contract with any Person to manage IX Company on a day-to-day basis subject
to the supervision of the Board.
SECTION 4.02. QUEST BOARD REPRESENTATION. (a) As soon as
practicable following the Closing Date and in any event within ten Business
Days, IX Company will take such actions as may be necessary to increase the size
of the Board by two Directors to be designated by Quest.
(b) As long as the Quest Members beneficially own, in the
aggregate, Units constituting a Percentage Interest of:
(i) at least 20%, Quest shall be entitled to designate two,
and only two, individuals as Directors,
(ii) at least 10%, but less than 20%, Quest shall be entitled
to designate one, and only one, individual as a Director; and
17
(iii) at least 5%, but less than 10%, Quest shall be entitled
to designate one, and only one, individual as a Director; PROVIDED that
this clause (iii) shall be terminated and deemed deleted from this
Agreement concurrently with any termination or expiration of the Data
Access Agreement.
(c) Subject to Section 4.02(b), if a Director designated by
Quest ceases to serve as a Director for any reason, the vacancy created by such
Director's ceasing to serve shall be filled by an individual designated by
Quest.
(d) In the event that at any time the number of Directors
designated by Quest pursuant to this Section 4.02 is greater than the number of
Directors that the Quest has the right to designate pursuant to Section 4.02(b),
then that number of Quest Directors shall be deemed to have resigned immediately
upon the occurrence of such event such that the remaining number of Quest
Directors, if any, conform to the provisions of this Agreement, and Quest shall
take all action to promptly effect such resignation.
(e) Any individual designated by Quest pursuant to Section
4.02(b) or (c) shall be reasonably acceptable to IX Company; PROVIDED that in
all events the Chief Executive Officer of Quest shall be deemed reasonably
acceptable.
(f) This Agreement does not create or constitute, and shall
not be construed as creating or constituting, a voting trust agreement under the
Delaware General Corporation Law or any other applicable corporation law.
(g) As long as Quest has the ability to designate a Director
pursuant to Section this 4.02, one such Director shall serve on each committee
of the Board.
(h) If IX Company shall at any time effect an initial public
offering of its Units, SB, Quest and IX Company shall negotiate in good faith to
amend this Section 4.02 to reflect terms and conditions, consistent with Quest's
right to appoint Directors pursuant to Section 4.02(b), customary for a public
company organized as a corporation which in no event shall decrease the number
of directors provided for in Section 4.02(b) or amend the proviso in Section
4.02(e).
SECTION 4.03. NO GOVERNANCE RIGHTS. (a) Except as expressly
provided in this Section 4.03, none of Quest, its Affiliates or its designated
Directors shall have any approval, veto or other governance rights of any kind
or nature whatsoever over any management decision made by SB, the Board, the
other Members or otherwise with respect to IX Company; PROVIDED that the Quest
directors shall have normal voting rights of other directors (which shall
specifically exclude any special approval or veto rights).
(b) IX Company shall be free from any restriction of any kind
or nature whatsoever (but subject to its obligations under Sections 3.02(c), (d)
and (e) and Section 4.04) under this Agreement on its rights to issue Units
and/or Preference
18
Securities to any Person except as expressly set forth in Sections 2.05 and
3.02(b); PROVIDED that during the Applicable Period IX Company will not, without
Quest's prior written consent, issue Units or Preference Securities to any
Competitive Laboratory Company except (i) in a widely distributed public
offering of such Units and/or Preference Securities or (ii) as permitted
pursuant to Section 4.03(c).
(c) Notwithstanding Section 4.03(b), IX Company shall be free
to issue Nonvoting Units to any Competitive Laboratory Company; PROVIDED that
such Units at the time of their issuance do not represent a Percentage Interest
of more than 5% and such Competitive Laboratory is not given the right to
designate a Director.
(d) IX Company shall be free from any restriction of any kind
or nature whatsoever under this Agreement on its rights to consolidate, merge or
combine with, convey, sell, transfer or lease all or substantially all its
assets to, or enter into any other type of business combination with, any
Person; PROVIDED that the Quest Members shall receive consideration in any such
transaction on a per-Unit basis that is not less than the consideration received
on a per-Unit basis by any other Member of IX Company; PROVIDED FURTHER that
this Section 4.03(d) shall not diminish or otherwise affect Quest's rights under
Section 9.03 of the Data Access Agreement to terminate the Data Access Agreement
under the conditions provided therein.
SECTION 4.04. AFFILIATE TRANSACTIONS. (a) During the period
prior to the date of the first Qualifying Third Party Investment, IX Company
shall not enter into any transaction with SB or an Affiliate of SB unless the
terms and conditions of such transaction are no more favorable to SB or such
Affiliate of SB than if such terms and conditions were negotiated by two
reasonable, independent Third Parties on an arm's-length basis.
(b) So long as SB and its Affiliates have an aggregate
Percentage Interest of 29.5% or more, IX Company shall not consolidate, merge or
combine with, convey, sell, transfer or lease all or substantially all its
assets to, or enter into any other type of business combination with SB or
another Affiliate of SB except (i) with an Affiliate of IX Company controlled
(as such term is defined in the definition of Affiliate) by IX Company or (ii)
in a transaction in which immediately after giving effect to such transaction,
the relative equity ownership interests in the surviving company are
substantially the same as the Percentage Interests of the Members prior to such
transaction.
(c) The parties agree that the rights granted to Quest under
this Agreement have been negotiated on an arms'-length basis and that,
notwithstanding anything to the contrary in this Agreement, any rights granted
by IX Company to SB or its Affiliates that are substantially similar to Sections
2.03, 2.05 (to the extent it does not affect Quest's ability to fully exercise
its rights under Section 2.05), 2.07, 4.02, 4.04, 4.05, 5.07 and 5.08 would not
be more favorable to SB and its Affiliates than if such rights were negotiated
by two reasonable, independent Third Parties on an arms'-length basis. Quest
19
hereby consents to any future grant by IX Company to SB and its Affiliates of
rights substantially similar to the rights granted to Quest and its Affiliates
hereunder.
SECTION 4.05. REPORTING. So long as the Quest Members hold a
Percentage Interest of at least 5%, IX Company shall provide Quest on a monthly
basis prior to the IPO Date with summary financial information, including
summary monthly financial statements and budgets, to the extent prepared by IX
Company and provided to its senior management and SB.
SECTION 4.06. TAX MATTERS PARTNER. If IX Company is treated as
a partnership for U.S. Federal income tax purposes, SB shall be the "tax matters
partner" within the meaning of Section 6231(a)(7) of the Internal Revenue Code
of 1986, as amended (the "CODE"), and shall act in any similar capacity under
other applicable tax law. All expenses incurred by SB while acting in such
capacity shall be paid or reimbursed by IX Company.
SECTION 4.07. TAX DECISIONS AND ELECTIONS. If IX Company is
treated as a partnership for U.S. Federal income tax purposes, SB shall have the
right to make all decisions with respect to the tax matters and tax returns of
IX Company, including the right to make all tax elections required or permitted
to be made by IX Company under the Code or other applicable tax law.
ARTICLE V
RESTRICTIONS ON TRANSFER; OTHER TRANSFER RIGHTS
SECTION 5.01. RESTRICTIONS ON TRANSFER. Subject to Section
5.07, Quest and its Affiliates will be subject to the following restrictions on
the sale, transfer or other disposition (each, a "TRANSFER") of any Units owned
by Quest or such Affiliates:
(a) during the period from the date hereof through and
including the third anniversary of the date hereof, Quest will not, and
will cause its Affiliates not to, Transfer all or any portion of the
Quest Interest, except to an Affiliate of Quest which agrees in
writing, in form and substance reasonably acceptable to SB, to be bound
by the provisions of this Article V; and
(b) during the Applicable Period, Quest will not, and will
cause its Affiliates not to, Transfer all or any portion of the Quest
Interest to a Pharmaceutical Company, except in connection with a
widely distributed public offering of Units and/or Preference
Securities.
SECTION 5.02. RIGHT OF FIRST REFUSAL. (a) Both parties agree
that, so long as SB and its Affiliates collectively hold a Percentage Interest
of at least 10%, if a Quest Member receives during the Applicable Period a bona
fide offer (a "TRANSFER
20
OFFER") to purchase for cash any or all of the Units and/or Preference
Securities comprising the Quest Interest and then owned by such Quest Member
from any Person that is not in a Pharmaceutical Company (an "OFFEROR"), which
such Quest Member wishes to accept, Quest shall cause the Transfer Offer to be
reduced to writing and shall provide a written notice (the "TRANSFER NOTICE") of
such Transfer Offer to IX Company and to SB. Quest shall cause the Transfer
Notice to also contain an irrevocable offer from such Quest Member to sell all
or such portion of such Units and/or Preference Securities to SB at a price
equal to the offered price, and upon substantially the same terms and conditions
as those contained in the Transfer Offer and shall be accompanied by a true and
correct copy of the Transfer Offer (which shall identify the Offeror, the amount
of Units and/or Preference Securities to be transferred (the "TRANSFER
SECURITIES"), the price contained in the Transfer Offer and the other terms and
conditions of the Transfer Offer). SB shall have the irrevocable right and
option, within ten Business Days after the date the Transfer Notice is given to
SB, to accept such offer, in the aggregate, as to all, but not less than all, of
the Transfer Securities. If SB desires to exercise such option, SB shall provide
Quest with written notice within such ten-Business Day period.
(b) If at the end of the ten-business day period after the
giving of the Transfer Notice, SB shall not have accepted the offer contained in
such notice as to all the Units and/or Preference Securities covered thereby,
the Quest Member shall have 30 days in which to sell all, but not less than all,
of the Units and/or Preference Securities to the Offeror, at a price equal to
that contained in the Transfer Notice and on terms not more favorable to the
Offeror than were contained in the Transfer Notice. No sale may be made to any
Offeror unless such Offeror agrees in writing, in form and substance acceptable
to SB, to be bound by the provisions of this Article V. Promptly after any sale
pursuant to this Section 5.02, Quest shall notify SB of the consummation thereof
and shall furnish such evidence of the completion (including time of completion)
of such sale and of the terms thereof as SB may request. If at the end of such
30-day period the Quest Member has not completed the sale of all of the Units
and/or Preference Securities, the Quest Member shall no longer be permitted to
sell such securities pursuant to this Section 5.02 without again fully complying
with the provisions of this Section 5.02, and all the restrictions on Transfer
contained in this Agreement shall again be in effect with respect to all of the
Quest Member's Units and/or Preference Securities, including the Transfer Offer.
(c) Quest shall cause each Quest Member to comply with this
Section 5.02.
SECTION 5.03. TRANSFERS OF SB INTEREST. (a) Each of SB and its
Affiliates shall be free from any restriction of any kind or nature whatsoever
under this Agreement on the Transfer by it of any Units and/or Preference
Securities that it may hold at any time (i) except to the extent provided in
Section 5.05 and (ii) except to the extent provided in Section 5.03(b).
21
(b) Notwithstanding Section 5.03(a), during the Applicable
Period, SB will not, and will cause its Affiliates not to, Transfer any Units
and/or Preference Securities held by them to any Competitive Laboratory Company
except in connection with a widely distributed public offering of the Units
and/or Preference Securities.
SECTION 5.04. DRAGALONG RIGHT. Notwithstanding any provision
to the contrary set forth herein, if at any time during the Applicable Period
(i) SB enters into an agreement (a "PURCHASE AGREEMENT") to sell or otherwise
Transfer all or substantially all of the Units owned by it to any Person other
than an Affiliate of SB (the "PURCHASER"), and (ii) the Purchaser requires as a
condition to completion of such transaction that each Quest Member who is not a
party to the Purchase Agreement (a "DRAGALONG MEMBER") sell the same percentage
of the total number of Units then owned by such Dragalong Member as the
percentage of the total number of Units then owned by SB which is represented by
the total number of Units proposed to be sold or otherwise Transferred by SB
pursuant to the Purchase Agreement, at the same time, at the same price and on
the same terms and conditions as are offered to SB, then in such event each such
Dragalong Member shall at the request of SB, subject to Section 7.12, which
request shall be made in the form of a written notice setting forth (i) the name
and address of the Purchaser, (ii) the proposed purchase price for the Units
proposed to be purchased, (iii) the form of consideration to be paid by the
Purchaser and (iv) the other terms and conditions of the Purchaser's offer,
accept the Purchaser's offer and execute a joinder to the Purchase Agreement
within two Business Days following the date of such request; PROVIDED, HOWEVER,
that a Dragalong Member shall not be obligated to make any representations and
warranties under such Purchase Agreement other than regarding its ownership of
its Units, due organization and authority, absence of conflicts, consents and
compliance with law and shall not have any other obligations that a minority
shareholder selling shares customarily would not have (including non-competition
obligations); PROVIDED, FURTHER, that the liability of a Dragalong Member for
any breach of representation, warranty or covenant under the Purchase Agreement
shall not exceed the consideration to be paid to such Dragalong Member for its
Units sold pursuant to this Section 5.04 without the consent of such Dragalong
Member.
SECTION 5.05. TAGALONG RIGHT. (a) If at any time during the
Applicable Period SB proposes to sell or otherwise Transfer all or substantially
all of its Units to a Purchaser (other than to an Affiliate of SB), SB (i) will
not enter into any Purchase Agreement with any such Purchaser, unless SB causes
the Purchaser to extend to each Quest Member who is not a party to the Purchase
Agreement (a "TAGALONG MEMBER") a written offer to purchase (a "TAGALONG OFFER")
the same percentage of the total number of Units then owned by such Tagalong
Member as the percentage of the total number of Units then owned by SB which is
represented by the total number of Units proposed to be sold or otherwise
Transferred by SB pursuant to the Purchase Agreement (the "OFFERED AMOUNT"), at
the same time, at the same price and on the same terms and conditions as are
offered to SB, and (ii) will not sell any of its Units pursuant to any such
Purchase Agreement unless such Purchaser purchases from each Tagalong Member,
who properly
22
accepts such Tagalong Offer in the manner provided in Section 5.05(b), the
Offered Amount concurrently with the purchase of the Units of SB.
(b) SB shall cause the Purchaser to give each Tagalong Member
written notice of the Tagalong Offer, which notice shall be subject to Section
7.12 and shall set forth (i) the name and address of the Purchaser, (ii) the
proposed purchase price for the Units proposed to be purchased, (iii) the form
of consideration to be paid by the Purchaser and (iv) the other terms and
conditions of the Tagalong Offer. The Tagalong Offer must be exercised by a
Tagalong Member within ten Business Days following receipt of the notice
required by the preceding sentence by delivery of a written notice to SB and the
Purchaser indicating the Tagalong Member's election to accept the Tagalong
Offer.
SECTION 5.06. FAILURE TO CONSUMMATE A SALE. SB shall not be
liable under any circumstances to the Quest Members if the sale contemplated by
a Purchase Agreement pursuant to Section 5.03 or Section 5.04 is not
consummated, regardless of the reason for the failure of such consummation.
SECTION 5.07. PARTICIPATION IN INITIAL PUBLIC OFFERING. (a) IX
Company shall permit Quest and its Affiliates to participate in an initial
public offering by IX Company of its Units on the same basis as SB and SB's
Affiliate are permitted to participate in such offering, pro rata based on the
relative Percentage Interests on the IPO Date of Quest and its Affiliates on one
hand compared to SB and its Affiliates on the other hand. If SB and its
Affiliates enter into "lockup" agreements with IX Company and/or the
underwriters of IX Company's initial public offering pursuant to which SB and
its Affiliates agree not to Transfer their Units for a period of time following
an initial public offering by IX Company, Quest and its Affiliates shall enter
into "lockup" agreements with IX Company and/or such underwriters on the same
terms and conditions as SB.
(b) If SB proposes to exercise its rights pursuant to Section
3.02(d), or otherwise is offered the opportunity by IX Company, to purchase
Units and/or Preference Securities immediately prior to an initial public
offering by IX Company, Quest shall be permitted to purchase a pro rata (based
on the relative Percentage Interests of Quest and SB as of such date) number of
Units and/or Preference Securities of the same class or series, at the same
time, at the same price and on the same terms and conditions as offered to SB.
SECTION 5.08. REGISTRATION RIGHTS. Concurrently with its
consummation of an initial public offering of its Units, IX Company shall grant
to Quest and its Affiliates and to SB and its Affiliates rights to cause IX
Company to register under the Securities Act resales of any Units held at such
time by such Members ("REGISTRATION RIGHTS"). Such Registration Rights shall not
be less favorable than the Registration Rights that IX Company grants, or shall
have granted, to the other Members of IX Company at or prior to such time.
23
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF QUEST. Quest
hereby represents and warrants to IX Company and SB and agrees that:
(a) Quest is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Quest has all
requisite corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. All corporate acts and other proceedings required to be taken by Quest
to authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and properly
taken. This Agreement has been duly executed and delivered by Quest and
constitutes a legal, valid and binding obligation of Quest, enforceable against
Quest in accordance with its terms.
(b) (i) Quest will acquire the Quest Interest for its own
account for the purpose of investment and not with a view towards or any present
intention of selling or distributing the Units and (ii) Quest is an Accredited
Investor (as defined in Regulation D under the Securities Act).
(c) Quest understands (i) that the Nonvoting Units comprising
the Quest Interest have not been registered under the Securities Act by reason
of their issuance in a transaction exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof, (ii) that such Units may
not be disposed of unless such disposition is either registered under the
Securities Act or is exempt from registration under that Act and (iii) that IX
Company has no obligation to register such Units except as provided in Sections
5.08.
(d) Quest has such knowledge and experience in financial and
business matters that Quest is capable of evaluating the merits and risks of an
investment in IX Company.
(e) Quest is a "qualified purchaser" as such term is defined
under Section 2(a)(51) of the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
SECTION 6.02. REPRESENTATIONS AND WARRANTIES OF SB. SB hereby
represents and warrants to Quest that:
(a) SB is a public limited company duly organized and validly existing
under the laws of England. SB has all requisite corporate power and authority to
enter into this
24
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. All corporate acts and other proceedings
required to be taken by SB to authorize the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and properly taken. This Agreement has been duly executed and
delivered by SB and constitutes a legal, valid and binding obligation of SB,
enforceable against SB in accordance with its terms.
(b) On the Formation Date, (i) IX Company shall have no indebtedness
for borrowed money and no intercompany payables owed to SB or its Affiliates and
(ii) the tangible net worth of IX Company (as determined under GAAP) shall be
positive.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. INTERPRETATION. (a) The headings contained in
this Agreement and in the table of contents to this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(b) In the event that an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
(c) The definitions of the terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference
herein to any Person shall be construed to include the Person's successors and
permitted assigns, (iii) the words "herein", "hereof" and "hereunder", and words
of similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, and (iv) all references herein to
Articles, Sections, Exhibits or Schedules shall be construed to refer to
Articles, Sections, Exhibits and Schedules of this Agreement.
SECTION 7.02. AMENDMENTS. No amendment, modification or waiver
in respect of this Agreement shall be effective unless it shall be in writing
and signed by the parties hereto.
25
SECTION 7.03. ASSIGNMENT. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable in whole or in
part by Quest, SB or IX Company (other than in whole by operation of law in
connection with a merger, or sale of substantially all the assets, of Quest, SB
or IX Company) without the prior written consent of the other parties hereto;
PROVIDED, HOWEVER, that any party may assign its rights hereunder in whole and
not in part to an Affiliate of such party without the prior written consent of
the other parties; PROVIDE FURTHER, HOWEVER, that no assignment shall limit or
affect the assignor's obligations hereunder. In the event that any such assignee
ceases to be an Affiliate of the assignor, all rights and obligations hereunder
shall revert to the assignor. Any attempted assignment in violation of this
Section 7.03 shall be void. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
permitted assigns of such party.
SECTION 7.04. NO THIRD-PARTY BENEFICIARIES. This Agreement is
for the sole benefit of the parties hereto and their permitted assigns and
nothing herein expressed or implied shall give or be construed to give to any
Person other than the parties hereto and such assigns, any legal or equitable
rights hereunder.
SECTION 7.05. NOTICES. All notices or other communications
required or permitted to be given hereunder shall be in writing and shall be
delivered by hand or sent by prepaid telex, cable or telecopy or sent, postage
prepaid, by registered, certified or express mail or reputable overnight courier
service and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service), as follows:
(i) if to Quest,
Quest Diagnostics Incorporated
Xxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: General Counsel
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X'Xxxxx; and
26
(ii) if to SB or IX Company,
SmithKline Xxxxxxx plc
Xxx Xxx Xxxxxxxx Xxxxx
Xxxxxxxxx XX0 0XX
Brentford England
Attention: Xxxxx X. Xxxxx
with copies to:
SmithKline Xxxxxxx Corporation
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: U.S. General Counsel; and
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx
SECTION 7.06. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other party. Copies of
executed counterparts transmitted by telecopy, telefax or other electronic
transmission service shall be considered original executed counterparts for
purposes of this Section 7.06; PROVIDED that receipt of copies of such
counterparts is confirmed.
SECTION 7.07. ENTIRE AGREEMENT. This Agreement and the Data
Access Agreement contain the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating to such subject matter. Neither party
shall be liable or bound to any other party in any manner by any
representations, warranties or covenants relating to such subject matter except
as specifically set forth herein.
SECTION 7.08. SEVERABILITY. If any provision of this Agreement
(or any portion thereof) or the application of any such provision (or any
portion thereof) to any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof (or the remaining portion thereof) or the application of such provision
to any other Persons or circumstances.
SECTION 7.09. CONSENT TO JURISDICTION. Each of Quest and SB
irrevocably submits to the exclusive jurisdiction of (a) a Federal Court for the
Southern
27
District of New York and (b) any New York state court located in the County of
New York, for the purposes of any suit, action or other proceeding arising out
of this Agreement, or any transaction contemplated hereby. Each of Quest and SB
agrees to commence any action, suit or proceeding relating hereto either in a
Federal Court for the Southern District of New York or in a New York state court
located in the County of New York. Each of Quest and SB further agrees that
service of any process, summons, notice or document by U.S. registered mail to
such party's respective address set forth above shall be effective service of
process for any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction in this Section 7.09. Each of
Quest and SB irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement, or the
transactions contemplated hereby in (i) any Federal court for the Southern
District of New York or (ii) any New York state court located in the County of
New York, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
SECTION 7.10. WAIVER OF JURY TRIAL. Each of Quest and SB
hereby waives to the fullest extent permitted by applicable law any right it may
have to a trial by jury with respect to any litigation directly or indirectly
arising out of, under or in connection with this Agreement or any transaction
contemplated hereby. Each of Quest and SB (a) certifies that no representative,
agent or attorney of any other party has represented, expressly or otherwise,
that such other party would not, in the event of litigation, seek to enforce
that foregoing waiver and (b) acknowledges that it and the other parties hereto
have been induced to enter into this Agreement by, among other things, the
mutual waivers and certifications in this Section 7.10.
SECTION 7.11. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State other than
Section 5-1401 of the New York General Obligations Law.
SECTION 7.12. CONFIDENTIALITY. (a) So long as Quest and/or an
Affiliate of Quest is a Member of IX Company, and for five (5) years thereafter,
Quest shall not, shall ensure that its Affiliates, officers, directors,
employees and Quest Directors do not, and shall use commercially reasonable
efforts to cause its agents, advisors and representatives ("REPRESENTATIVES")
not to use or disclose to Third Parties any confidential information relating to
IX Company and its Affiliates received from IX Company, SB or their Affiliates,
without first obtaining the written consent of IX Company. This confidentiality
obligation shall not apply to such information which is or becomes a matter of
public knowledge through no fault of Quest or its Affiliates or Representatives,
or is disclosed to Quest or its Affiliates or Representatives by a Third Party
having the right to do so, or is subsequently and independently developed by
employees of Quest who had no knowledge of the confidential information
disclosed, or is required by
28
Applicable Law to be disclosed (PROVIDED that to the extent feasible, IX Company
is provided reasonable advance notice of such disclosure and provided with an
effective opportunity to appear, protest, and seek to limit such disclosure).
Quest shall take, and shall ensure that its Affiliates, officers, directors,
employees and Quest Directors take, and shall use commercially reasonable
efforts to cause its Representatives to take, all reasonable measures to assure
that no unauthorized use or disclosure is made to Third Parties of such
information.
(b) Each party shall keep confidential, and shall cause its
Affiliates, officers, directors, employees and Quest Directors to keep
confidential and shall use commercially reasonable efforts to cause its
Representatives to keep confidential, (i) the existence of any notice delivered
by a party hereto to another party hereto in accordance with this Agreement and
(ii) the content of any such notice, except as required by Applicable Law and
except for information which is available to the public, or thereafter becomes
available to the public other than as a result of a breach of this Section
7.12(b). In the event disclosure is required under Applicable Law, each party
shall, and shall cause its applicable Affiliate, officer, director, employee or
Quest Director to, provide the other party with prompt prior written notice of
such requirement so that such party may seek a protective order or other
appropriate remedy, and otherwise cooperate in all commercially reasonable
respects in obtaining the same.
SECTION 7.13. REMEDIES. (a) SB shall not have any liability
under this Agreement in connection with its breach of any provision of this
Agreement for any consequential, punitive, indirect, special or incidental
damages incurred by Quest, IX Company or an Affiliate of Quest or IX Company
other than consequential, punitive, indirect, special or incidental damages
actually paid to any Third Party by Quest, IX Company or an Affiliate of Quest
or IX Company.
(b) IX Company shall not have any liability under this
Agreement in connection with its breach of any provision of this Agreement for
any consequential, punitive, indirect, special or incidental damages incurred by
SB, Quest or any Affiliate of SB or Quest other than consequential, punitive,
indirect, special or incidental damages actually paid to any Third Party by SB,
Quest or any Affiliate of SB or Quest.
(c) Quest shall not have any liability under this Agreement in
connection with its breach of any provision of this Agreement for any
consequential, punitive, indirect, special or incidental damages incurred by SB,
IX Company or any Affiliate of SB or IX Company other than consequential,
punitive, indirect, special or incidental damages actually paid to any Third
Party by SB, IX Company or any Affiliate of SB or IX Company.
(d) A material breach of the provisions of this Agreement by
IX Company or, so long as IX Company is an Affiliate of SB, by SB shall entitle
Quest to terminate the Data Access Agreement upon the giving of 60 days' written
notice setting forth the nature of such breach. However, if such breach is cured
within the 60-day period (or a
29
longer period where the nature of the breach is such that it is not curable
within 60 days but actions to cure such breach within a reasonable period of
time have promptly been initiated and continue to be diligently pursued, meeting
reasonable milestones to cure), then such notice shall be deemed to be
withdrawn.
(e) If the Data Access Agreement terminates, SB and Quest each
shall have the right to immediately terminate this Agreement.
SECTION 7.14. EXCULPATION AND INDEMNIFICATION. During the
period prior to the IPO Date, the Constitutive Documents shall provide, subject
to Applicable Law, that:
(a) none of the Members nor any of their respective affiliates
(other than IX Company) nor any director, officer, employee,
stockholder, partner, member, agent or representative of IX Company, of
any Member or of their respective Affiliates (each an "INDEMNIFIED
PERSON") shall be liable to IX Company or to the Members for any loss,
claim, damage or liability arising from, related to, or in connection
with, such Constitutive Documents or IX Company's business or affairs,
except for any loss, claim, damage or liability determined by final
judgment of a court of competent jurisdiction to have resulted from
such Indemnified Person's acts or omissions taken or omitted, as
applicable, in bad faith, involving intentional misconduct or a knowing
violation of law or in which the Indemnified Person personally gained
in fact a financial profit or other advantage to which the Indemnified
Person was not entitled;
(b) IX Company shall, to the fullest extent permitted by
Applicable Law, indemnify and hold harmless each Indemnified Person
against any losses, claims, damages or liabilities to which such
Indemnified Person may become subject in connection with any matter
arising from, related to, or in connection with, such Constitutive
Documents or IX Company's business or affairs, except for such losses,
claims, damages or liabilities as are determined by final judgment of a
court of competent jurisdiction to have resulted from such Indemnified
Person's acts or omissions taken or omitted, as applicable, in bad
faith, involving intentional misconduct or a knowing violation of law
or in which the Indemnified Person personally gained in fact a
financial profit or other advantage to which the Indemnified Person was
not entitled;
(c) notwithstanding anything else contained in such
Constitutive Documents, the indemnity obligations of IX Company under
Section 7.14(b) shall:
(i) be in addition to any liability that IX Company
may otherwise have to each Indemnified Person;
30
(ii) extend upon the same terms and conditions to the
directors, committee members, officers, stockholders,
partners, members, employees, agents and representatives of
each Indemnified Person;
(iii) be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of
each Indemnified Person and any such Persons; and
(iv) be limited to the assets (including rights under
any insurance contracts) of IX Company; and
(d) in no event will the exercise by any Member or IX Company
of any rights provided them under any agreement entered into between IX
Company and such Member, that is not a part of the Constitutive
Documents, entitle such Member to any right of exculpation or
indemnification under this Section 7.14.
SECTION 7.15. INSURANCE. IX Company shall maintain a
commercially reasonable amount of general liability insurance against claims
from third parties arising out of IX Company's business, but only to the extent
such insurance is generally available on commercially reasonable terms.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties as of the day and year set forth below.
Accepted and agreed to by:
SMITHKLINE XXXXXXX PLC,
by
/s/ XXXXXX X. XXXXXX
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Authorized Signatory
QUEST DIAGNOSTICS INCORPORATED,
by
/s/ XXXXXXX X. XXXXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
