Exhibit 10.3

 

EMPLOYEE MATTERS AGREEMENT

 

dated as of

 

April 30, 2004

 

between

 

PHARMACOPEIA, INC.

 

and

 

PHARMACOPEIA DRUG DISCOVERY, INC.

 

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TABLE OF CONTENTS

 

 

ARTICLE I DEFINITIONS

 

 

 

ARTICLE II EMPLOYEES AND ALLOCATIONS OF LIABILITIES

 

 

 

2.1 Identification and Employment.

 

2.2 Spinco Assumption of Liabilities.

 

 

 

ARTICLE III SAVINGS PLANS

 

 

 

3.1 Transition Period

 

3.2 Establishment of and Transfer to the Spinco Savings Plan.

 

 

 

ARTICLE IV WELFARE PLANS

 

 

 

4.1 Continuation in Supplier Welfare Plans

 

4.2 Establishment of Welfare Plans.

 

4.3 Vacation and Sick Pay Liabilities.

 

4.4 Medical Spending/Dependent Care Accounts.

 

4.5 Severance.

 

4.6 Workers’ Compensation and Unemployment Compensation.

 

4.7 HIPAA Business Associate Provisions.

 

 

 

ARTICLE V EXECUTIVE COMPENSATION PROGRAMS

 

 

 

5.1 Supplier Non-Qualified Plan.

 

5.2 Bonus Plans.

 

 

 

ARTICLE VI STOCK INCENTIVE PLANS

 

 

 

6.1 Stock Option Awards.

 

6.2 Employee Stock Purchase Plan.

 

 

 

ARTICLE VII FOREIGN PLANS

 

 

 

7.1 Foreign Retirement Plans.

 

7.2 Foreign Welfare Plans.

 

 

 

ARTICLE VIII ACCOUNTING

 

 

 

8.1 Payment of and Accounting Treatment for Expenses.

 

8.2 Accounting Adjustments.

 

 

 

ARTICLE IX AUDITS; INFORMATION SHARING

 

 

 

9.1 Audits.

 

9.2 Sharing of Participant Information.

 

 

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ARTICLE X GENERAL

 

 

 

10.1 Notices.

 

10.2 Amendment and Waiver.

 

10.3 Entire Agreement.

 

10.4 Parties in Interest.

 

10.5 No Third-Party Beneficiaries; No Termination of Employment.

 

10.6 Right to Amend or Terminate Any Plans.

 

10.7 Effect if Distribution Does Not Occur.

 

10.8 Relationship of Parties.

 

10.9 Affiliates.

 

10.10 Further Assurances and Consents

 

10.11 Severability.

 

10.12 Governing Law.

 

10.13 Counterparts.

 

10.14 Disputes.

 

10.15 Assignment.

 

10.16 Interpretation.

 

10.17 Headings.

 

 

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EMPLOYEE MATTERS AGREEMENT

 

THIS IS AN EMPLOYEE MATTERS AGREEMENT, dated as of April 30, 2004 (the
“Agreement”), by and between Pharmacopeia, Inc., a Delaware corporation
(together with its successors and permitted assigns, “Supplier”), and
Pharmacopeia Drug Discovery, Inc., a Delaware corporation (together with its
successors and permitted assigns, “Spinco”) (collectively, the “Parties” or
individually, a “Party”).

 

Background

 

WHEREAS, the Board of Directors of Supplier has authorized a distribution of
Spinco’s common stock to all holders of outstanding stock of the Supplier (the
“Distribution”).

 

WHEREAS, in connection with the Distribution, Supplier and Spinco will enter
into a number of agreements that will govern certain matters relating to the
Distribution and the relationship of Supplier and Spinco and their respective
subsidiaries and affiliates following the Distribution.

 

WHEREAS, this Agreement sets forth the arrangements between the Parties relating
to certain employee benefit and compensation matters.

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants
and agreements set forth in this Agreement, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

The following words and phrases used in this Agreement shall have the meanings
set forth below unless a different meaning is plainly required by the context.

 

1.1                               “ACTIVE SPINCO EMPLOYEE” MEANS:

 

(A)                                  ANY EMPLOYEE WHO IS PERFORMING SERVICES FOR
SPINCO ON THE DISTRIBUTION DATE, INCLUDING ANY SUCH EMPLOYEE WHO IS NOT ACTIVELY
PERFORMING SUCH SERVICE AS A RESULT OF SICK LEAVE, WORKERS’ COMPENSATION LEAVE,
SHORT-TERM DISABILITY OR OTHER AUTHORIZED LEAVE OF ABSENCE; AND

 

(B)                                 ANY EMPLOYEE OF SUPPLIER WHO IS DESIGNATED
BY SUPPLIER AND SPINCO AS AN EMPLOYEE TO WHOM SPINCO OFFERS EMPLOYMENT BEGINNING
ON OR BEFORE THE DISTRIBUTION DATE AND WHO HAS ACCEPTED SUCH OFFER.

 

1.2                               “ASO CONTRACT” MEANS AN ADMINISTRATIVE
SERVICES ONLY CONTRACT OR OTHER CONTRACT WITH A THIRD-PARTY ADMINISTRATOR OR
SERVICE PROVIDER THAT PERTAINS TO ANY SUPPLIER WELFARE PLAN OR SPINCO WELFARE
PLAN.

 

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1.3                               “BENEFICIARY” MEANS THE INDIVIDUAL(S)
DESIGNATED BY AN EMPLOYEE, FORMER EMPLOYEE, BY OPERATION OF LAW OR OTHERWISE, AS
THE PARTY ENTITLED TO COMPENSATION, BENEFITS, INSURANCE COVERAGE OR ANY OTHER
GOODS OR SERVICES UNDER ANY PLAN.

 

1.4                               “COBRA” MEANS THE CONSOLIDATED OMNIBUS BUDGET
RECONCILIATION ACT OF 1986

 

1.5                               “CODE” MEANS THE INTERNAL REVENUE CODE OF
1986, AS AMENDED.

 

1.6                               “DISTRIBUTION AGREEMENT” MEANS THE MASTER
SEPARATION AND DISTRIBUTION AGREEMENT BETWEEN SUPPLIER AND SPINCO OF EVEN DATE
HEREWITH.

 

1.7                               “DISTRIBUTION DATE” MEANS THE DATE UPON WHICH
SUPPLIER COMPLETES THE DISTRIBUTION OF SPINCO’S COMMON STOCK.

 

1.8                               “EMPLOYEE” MEANS ANY INDIVIDUAL WHO PERFORMS
SERVICES PURSUANT TO A COMMON-LAW EMPLOYER-EMPLOYEE RELATIONSHIP.

 

1.9                               “ERISA” MEANS THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED.

 

1.10                        “FOREIGN PLAN,” WHEN IMMEDIATELY PRECEDED BY
“SUPPLIER,” MEANS A PLAN MAINTAINED BY SUPPLIER OR WHEN IMMEDIATELY PRECEDED BY
“SPINCO,” A PLAN MAINTAINED BY SPINCO, IN EITHER CASE FOR THE BENEFIT OF
EMPLOYEES WHO PERFORM SERVICES AND/OR ARE COMPENSATED UNDER A PAYROLL THAT IS
ADMINISTERED OUTSIDE THE UNITED STATES, ITS TERRITORIES AND POSSESSIONS, AND THE
DISTRICT OF COLUMBIA.

 

1.11                        “FORMER SPINCO EMPLOYEE” MEANS AN EMPLOYEE WHOSE
EMPLOYMENT WITH SPINCO TERMINATED FOR ANY REASON (INCLUDING RETIREMENT OR
LONG-TERM DISABILITY) BEFORE THE DISTRIBUTION DATE AND WHO, AS OF THE
DISTRIBUTION DATE, IS NOT EMPLOYED BY SUPPLIER OR AN AFFILIATE OF SUPPLIER;
PROVIDED, HOWEVER, THAT ANY EMPLOYEE WHO TERMINATED EMPLOYMENT AT ANY TIME PRIOR
TO THE DISTRIBUTION DATE AND SUBSEQUENTLY BECAME EMPLOYED BY SUPPLIER AFTER SUCH
TERMINATION (AND DID NOT RETURN TO EMPLOYMENT WITH SPINCO), SHALL NOT BE A
FORMER SPINCO EMPLOYEE FOR ANY PURPOSE HEREUNDER.

 

1.12                        “GOVERNMENTAL AUTHORITY” MEANS ANY FEDERAL, STATE OR
LOCAL COURT, GOVERNMENT, DEPARTMENT, COMMISSION, BOARD, BUREAU, AGENCY, OFFICIAL
OR OTHER REGULATORY, ADMINISTRATIVE OR GOVERNMENTAL AUTHORITY, INCLUDING,
WITHOUT LIMITATION, THE UNITED STATES DEPARTMENT OF LABOR (“DOL”), AND THE
INTERNAL REVENUE SERVICE (“IRS”).

 

1.13                        “GROUP INSURANCE POLICY” MEANS A GROUP INSURANCE
POLICY ISSUED UNDER ANY SUPPLIER WELFARE PLAN OR ANY SPINCO WELFARE PLAN, AS
APPLICABLE.

 

1.14                        “HIPAA” MEANS THE HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT OF 1996, AS AMENDED (“HIPAA”),

 

1.15                        “HMO” MEANS A HEALTH MAINTENANCE ORGANIZATION THAT
PROVIDES BENEFITS UNDER THE SUPPLIER WELFARE PLANS OR THE SPINCO WELFARE PLANS.

 

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1.16                        “HMO AGREEMENTS” MEANS CONTRACTS, LETTER AGREEMENTS,
PRACTICES AND UNDERSTANDINGS WITH HMOS THAT PROVIDE MEDICAL SERVICES UNDER THE
SUPPLIER WELFARE PLANS OR SPINCO WELFARE PLANS.

 

1.17                        “KEY RECIPIENT” MEANS THE HOLDERS OF SUPPLIER
OPTIONS SET FORTH ON SCHEDULE I, ATTACHED HERETO AND MADE A PART HEREOF.

 

1.18                        “LIABILITIES” MEANS ANY AND ALL LOSSES, CLAIMS,
CHARGES, COMPENSATION, BENEFITS, DEBTS, DEMANDS, ACTIONS, COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ADMINISTRATIVE AND RELATED COSTS AND EXPENSES OF
ANY PLAN, PROGRAM OR ARRANGEMENT), OF ANY NATURE WHATSOEVER, WHETHER ABSOLUTE OR
CONTINGENT, MATURED OR UNMATURED, LIQUIDATED OR UNLIQUIDATED, ACCRUED OR
UNACCRUED, KNOWN OR UNKNOWN, WHENEVER ARISING.

 

1.19                        “PERSON” MEANS AN INDIVIDUAL, A GENERAL OR LIMITED
PARTNERSHIP, A CORPORATION, A TRUST, A JOINT VENTURE, AN UNINCORPORATED
ORGANIZATION, A LIMITED LIABILITY ENTITY OR ANY OTHER ENTITY.

 

1.20                        “PLAN” MEANS ANY PLAN, POLICY, PROGRAM, PAYROLL
PRACTICE OR OTHER ARRANGEMENT, WHETHER WRITTEN OR UNWRITTEN, PROVIDING BENEFITS
TO EMPLOYEES OR FORMER EMPLOYEES OF SUPPLIER OR SPINCO.

 

1.21                        “SPINCO COMMON STOCK” MEANS THE SHARES OF COMMON
STOCK, PAR VALUE $0.01 PER SHARE, OF SPINCO.

 

1.22                        “SPINCO WELFARE PLANS” MEANS THE WELFARE BENEFIT
PLANS, PROGRAMS, AND POLICIES THAT ARE SPONSORED BY SPINCO FOR ALL PERIODS AFTER
THE DISTRIBUTION DATE.

 

1.23                        “SUBSIDIARY” MEANS, WITH RESPECT TO ANY SPECIFIED
PERSON, ANY CORPORATION OR OTHER LEGAL ENTITY OF WHICH SUCH PERSON OR ANY OF ITS
SUBSIDIARIES OWNS OR CONTROLS, DIRECTLY OR INDIRECTLY, MORE THAN 50% OF THE
STOCK OR OTHER EQUITY INTEREST ENTITLED TO VOTE ON THE ELECTION OF MEMBERS TO
THE BOARD OF DIRECTORS OR SIMILAR GOVERNING BODY.

 

1.24                        “SUPPLIER COMMON STOCK” MEANS THE SHARES OF COMMON
STOCK, PAR VALUE $0.0001 PER SHARE, OF SUPPLIER.

 

1.25                        “SUPPLIER NON-QUALIFIED PLAN” MEANS THE
PHARMACOPEIA, INC. NON-QUALIFIED DEFINED COMPENSATION PLAN.

 

1.26                        “SUPPLIER SAVINGS PLANS” MEANS THE EMPLOYEES
TAX-DEFERRED SAVINGS PLAN OF PHARMACOPEIA, INC.

 

1.27                        “SUPPLIER STOCK INCENTIVE PLANS” MEANS,
COLLECTIVELY, THE PHARMACOPEIA, INC. 1994 INCENTIVE STOCK PLAN, THE
PHARMACOPEIA, INC. 2000 STOCK OPTION PLAN AND THE PHARMACOPEIA, INC. 1994
DIRECTOR OPTION PLAN.

 

1.28                        “SUPPLIER WELFARE PLANS,” MEANS THE WELFARE BENEFIT
PLANS, PROGRAMS, AND POLICIES LISTED THAT ARE SPONSORED BY SUPPLIER.

 

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1.29                        “TRANSITION END DATE” MEANS DECEMBER 31, 2004, OR
SUCH OTHER DATE AS THE PARTIES MUTUALLY AGREE IN WRITING.  THE TRANSITION END
DATE MAY BE DIFFERENT FOR DIFFERENT PLANS, PROGRAMS OR ARRANGEMENTS IF THE
PARTIES SO PROVIDE IN WRITING.

 

1.30                        “TRANSITION PERIOD” MEANS THE PERIOD BEGINNING ON
THE DISTRIBUTION DATE AND ENDING ON THE TRANSITION END DATE.  THE TRANSITION
PERIOD MAY BE DIFFERENT FOR DIFFERENT PLANS, PROGRAMS OR ARRANGEMENTS IF THE
PARTIES SO PROVIDE IN WRITING.

 

ARTICLE II
EMPLOYEES AND ALLOCATIONS OF LIABILITIES

 

2.1                               IDENTIFICATION AND EMPLOYMENT.  EFFECTIVE AS
OF THE DISTRIBUTION DATE, SUPPLIER AND SPINCO SHALL JOINTLY COMPILE A LIST BY
NAME, SOCIAL SECURITY NUMBER, JOB TITLE AND ASSIGNED LOCATION OF ALL ACTIVE
SPINCO EMPLOYEES.  EFFECTIVE AS OF THE DISTRIBUTION DATE, SPINCO SHALL EMPLOY
ALL SUCH IDENTIFIED ACTIVE SPINCO EMPLOYEES.  EFFECTIVE AS OF THE DISTRIBUTION
DATE, SUPPLIER AND SPINCO SHALL JOINTLY COMPILE A LIST BY NAME AND SOCIAL
SECURITY NUMBER OF ALL FORMER SPINCO EMPLOYEES WHO ARE IDENTIFIABLE AT SUCH
TIME.  AN INDIVIDUAL WHO WOULD BE CLASSIFIED AS A FORMER SPINCO EMPLOYEE SHALL
BE TREATED AS SUCH FOR ALL PURPOSES OF THIS AGREEMENT NOTWITHSTANDING THAT SUCH
INDIVIDUAL IS NOT ON THE LIST PROVIDED FOR IN THE PRECEDING SENTENCE.

 

2.2                               SPINCO ASSUMPTION OF LIABILITIES.  EXCEPT AS
SPECIFICALLY PROVIDED OTHERWISE IN THIS AGREEMENT, SPINCO SHALL, ON BEHALF OF
ITSELF AND ITS SUBSIDIARIES, ASSUME (I) ALL LIABILITIES RELATED TO ACTIVE SPINCO
EMPLOYEES AND FORMER SPINCO EMPLOYEES INCURRED IN CONNECTION WITH THEIR
EMPLOYMENT BY SPINCO OR SUPPLIER PRIOR TO THE DISTRIBUTION DATE; (II) ALL
LIABILITIES RELATED TO ACTIVE SPINCO EMPLOYEES AND FORMER SPINCO EMPLOYEES
ARISING ON OR AFTER THE DISTRIBUTION DATE RELATING TO EMPLOYMENT WITH ANY
AFFILIATE OF SPINCO; AND (III) ALL OTHER LIABILITIES RELATED TO, ARISING OUT OF,
OR RESULTING FROM OBLIGATIONS, LIABILITIES AND RESPONSIBILITIES ASSUMED OR
RETAINED BY SPINCO UNDER THIS AGREEMENT OR A PLAN SPONSORED OR MAINTAINED BY
SPINCO.

 

ARTICLE III
SAVINGS PLANS

 

3.1                               TRANSITION PERIOD

 

(A)                                  SPINCO WILL TAKE ALL SUCH ACTIONS AS ARE
NECESSARY TO ADOPT THE SUPPLIER SAVINGS PLAN, EFFECTIVE AS OF THE DISTRIBUTION
DATE, AS ANOTHER PARTICIPATING “EMPLOYER,” WITHIN THE MEANING OF THE SUPPLIER
SAVINGS PLAN; SUCH ADOPTION SHALL BE LIMITED BY THIS AGREEMENT AND SHALL SOLELY
RELATE TO THE SPINCO EMPLOYEES AND ANY NEW EMPLOYEES OF SPINCO WHO BECOME
ELIGIBLE TO PARTICIPATE IN THE SUPPLIER SAVINGS PLAN.  SUPPLIER HEREBY CONSENTS
TO THE ADOPTION OF THE PLAN BY SPINCO AND AGREES TO TAKE ALL SUCH ACTIONS AS ARE
REASONABLY NECESSARY TO FACILITATE THE ADOPTION OF THE PLAN BY SPINCO.  SUPPLIER
AND SPINCO AGREE TO COOPERATE AND SHARE THE COSTS ON A PRO RATA BASIS
(DETERMINED BY NUMBER OF PARTICIPANTS IN THE SAVINGS PLAN WHO ARE ACTIVE OR
FORMER SPINCO OR SUPPLIER EMPLOYEES) OF (I) COMMUNICATING WITH THE TRUSTEE,
RECORDKEEPERS AND ALL OTHER PROVIDERS WITH RESPECT TO THE SUPPLIER SAVINGS PLAN,
AND (II) COMMUNICATING WITH SUPPLIER SAVINGS PLAN PARTICIPANTS, INCLUDING
PROVIDING ANY SUMMARY OF MATERIAL MODIFICATIONS NECESSARY UNDER ERISA.

 

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(B)                                 SPINCO AND SUPPLIER ACKNOWLEDGE AND
UNDERSTAND THAT THE SUPPLIER SAVINGS PLAN WILL BE A “MULTIPLE EMPLOYER PLAN”
WITHIN THE MEANING OF SECTION 413(C) OF THE CODE FOR THE PERIOD THAT BOTH SPINCO
AND SUPPLIER PARTICIPATE IN THE PLAN SIMULTANEOUSLY.

 

(C)                                  SPINCO HEREBY AGREES TO: (I) TO WITHHOLD
ALL ELECTIVE DEFERRALS, AND MAKE ANY REQUIRED MATCHING CONTRIBUTIONS AS
DESCRIBED IN THE SUPPLIER SAVINGS PLAN, AND DELIVER THEM TO THE TRUSTEE OF THE
SUPPLIER SAVINGS PLAN; (II) IN ITS DISCRETION, MAKE ANY OTHER CONTRIBUTIONS
(SUCH AS QUALIFIED NON-ELECTIVE OR QUALIFIED MATCHING CONTRIBUTIONS) AS
DESCRIBED IN THE SUPPLIER SAVINGS PLAN, AND DELIVER THEM TO THE TRUSTEE OF THE
PLAN; (III) PROVIDE SPINCO EMPLOYEES WHO ARE PARTICIPANTS IN THE SUPPLIER
SAVINGS PLAN (OR BECOME PARTICIPANTS) WITH ACCESS TO THEIR ACCOUNTS AND
OPPORTUNITY TO MAKE INVESTMENT FUND ELECTIONS IN ACCORDANCE WITH THE TERMS OF
THE PLAN; AND (IV) ACCOUNT FOR ALL HOURS OF SERVICE EARNED UNDER THE SUPPLIER
SAVINGS PLAN, HIRINGS, TERMINATIONS AND ATTAINMENT OF ELIGIBILITY UNDER THE
SUPPLIER SAVINGS PLAN, AND COMMUNICATE SUCH EVENTS AS NECESSARY WITH THE
RECORDKEEPER OR TRUSTEE OF THE SUPPLIER SAVINGS PLAN.

 

(D)                                 SUPPLIER, AS THE PRIMARY EMPLOYER UNDER THE
SUPPLIER SAVINGS PLAN, HEREBY AGREES TO RETAIN SOLE RESPONSIBILITY FOR (I)
AMENDING THE SUPPLIER SAVINGS PLAN FOR PURPOSES OF MAINTAINING TAX-QUALIFICATION
UNDER THE CODE AND COMPLIANCE WITH THE PROVISIONS OF ERISA; (II) COMMUNICATING
WITH THE RECORDKEEPER, TRUSTEE, CUSTODIAN AND OTHER SIMILAR SERVICE PROVIDERS
FOR THE SUPPLIER SAVINGS PLAN (EXCEPT AS SET FORTH ABOVE); AND (III) (A)
CORRECTING ANY QUALIFICATION FAILURES OR PLAN DOCUMENT FAILURES (AS DESCRIBED IN
THE IRS EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM), AND (B) CORRECTING ANY
FIDUCIARY VIOLATIONS WITH THE DOL (INCLUDING CORRECTIONS UNDER THE VOLUNTARY
FIDUCIARY COMPLIANCE PROGRAM).  SUPPLIER SHALL SHARE A PRO RATA PORTION
(RELATING TO THE PERIOD AFTER ADOPTION BY SUPPLIER WITH RESPECT TO SUPPLIER’S
EMPLOYEES AND FORMER EMPLOYEES WHO PARTICIPATE OR PARTICIPATED IN THE SUPPLIER
SAVINGS PLAN DUE TO THEIR EMPLOYMENT WITH SUPPLIER) OF THE COSTS AND EXPENSES
ASSOCIATED WITH EACH OF THE FOREGOING PROVISIONS, EXCEPT PARAGRAPH (III). THE
COSTS OF PARAGRAPH (III) SHALL BE BORNE BY THE PARTY AT FAULT (AND SHARED BASED
UPON FAULT IF BOTH PARTIES ARE AT FAULT).

 

(E)                                  EFFECTIVE AS OF THE DISTRIBUTION DATE,
SUPPLIER SHALL AMEND THE SUPPLIER SAVINGS PLAN TO PROVIDE THAT (I) ANY MATCHING
CONTRIBUTIONS TO BE MADE ON OR AFTER THE DISTRIBUTION DATE WITH RESPECT TO
ACTIVE SPINCO EMPLOYEES SHALL BE MADE IN SPINCO COMMON STOCK, AND (II) ANY
MATCHING CONTRIBUTIONS TO BE MADE ON OR AFTER THE DISTRIBUTION DATE WITH RESPECT
TO ANY SUPPLIER EMPLOYEES SHALL BE MADE IN SUPPLIER COMMON STOCK; PROVIDED,
HOWEVER, THAT SUPPLIER AND SPINCO SHALL BE PERMITTED TO EXERCISE THEIR
DISCRETION TO PERMIT THE INVESTMENT OF MATCHING CONTRIBUTIONS IN ANY OTHER
INVESTMENT FUND AVAILABLE UNDER THE SUPPLIER SAVINGS PLAN EXCLUDING THE COMMON
STOCK FUND OF THE OTHER PARTY.

 

(F)                                    AS OF THE DISTRIBUTION DATE, ANY MATCHING
CONTRIBUTIONS OR OTHER AMOUNTS CREDITED TO SPINCO EMPLOYEES’ ACCOUNTS UNDER THE
SUPPLIER SAVINGS PLAN THAT ARE INVESTED IN SUPPLIER COMMON STOCK, SHALL RECEIVE
A DISTRIBUTION OF SPINCO COMMON STOCK IN ACCORDANCE WITH THE DISTRIBUTION
AGREEMENT.  AFTER THE DISTRIBUTION DATE, SUCH AMOUNTS SHALL BE INVESTED IN
ACCORDANCE WITH THE TERMS OF THE PLAN, AS AMENDED BY EITHER PARTY.

 

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3.2                               ESTABLISHMENT OF AND TRANSFER TO THE SPINCO
SAVINGS PLAN.

 

(A)                                  SPINCO SHALL ONLY BE AN EMPLOYER
PARTICIPATING IN THE PLAN WITH RESPECT TO THE SPINCO EMPLOYEES FOR THE PERIOD
BEGINNING ON THE DISTRIBUTION DATE AND ENDING ON THE TRANSITION END DATE. 
EFFECTIVE AS OF THE TRANSITION END DATE, SPINCO SHALL ESTABLISH A SEPARATE
SAVINGS PLAN FOR THE BENEFIT OF SPINCO EMPLOYEES (“SPINCO SAVINGS PLAN”).

 

(B)                                 EFFECTIVE AS OF THE TRANSITION END DATE,
SPINCO SHALL ADOPT THE SPINCO SAVINGS PLAN, WHICH SHALL PROVIDE BENEFITS WITH
RESPECT TO ACTIVE SPINCO EMPLOYEES, THEIR BENEFICIARIES AND THEIR RESPECTIVE
ALTERNATE PAYEES IMMEDIATELY AFTER THE TRANSITION END DATE.  FOR PURPOSES OF
ELIGIBILITY AND VESTING, ALL SERVICE RECOGNIZED UNDER THE SUPPLIER SAVINGS PLAN
(FOR PERIODS IMMEDIATELY BEFORE THE TRANSITION END DATE) SHALL, AS OF
IMMEDIATELY AFTER THE DISTRIBUTION DATE, BE RECOGNIZED AND TAKEN INTO ACCOUNT
UNDER THE SPINCO SAVINGS PLAN.

 

(C)                                  EFFECTIVE AS OF THE TRANSITION END DATE,
SPINCO SHALL ESTABLISH OR CAUSE TO BE ESTABLISHED WITH RESPECT TO THE SPINCO
SAVINGS PLAN, A TRUST, WHICH SHALL BE EXEMPT FROM TAXATION UNDER CODE
SECTION 501(A).

 

(D)                                 AS SOON AS PRACTICABLE AFTER THE TRANSITION
END DATE, BUT NO LATER THAN 30 DAYS AFTER THE TRANSITION END DATE, SUPPLIER
SHALL CAUSE THE ACCOUNTS (IF ANY) OF THE ACTIVE SPINCO EMPLOYEES AND FORMER
SPINCO EMPLOYEES, THEIR BENEFICIARIES AND THEIR RESPECTIVE ALTERNATE PAYEES, IF
ANY, UNDER THE SUPPLIER SAVINGS PLAN THAT ARE HELD BY ITS RELATED TRUST TO BE
TRANSFERRED TO THE SPINCO SAVINGS PLAN AND ITS RELATED TRUST, AND SPINCO SHALL
CAUSE SUCH TRANSFERRED ACCOUNTS TO BE ACCEPTED BY SUCH PLAN AND TRUST, IN
ACCORDANCE WITH SECTION 414(L) OF THE CODE TO THE EXTENT APPLICABLE.  THE
TRANSFER OF SUCH ACCOUNTS SHALL BE MADE:  (A) IN KIND, TO THE EXTENT THE ASSETS
CONSIST OF INVESTMENTS IN THE SPINCO COMMON STOCK FUND AND (B) OTHERWISE IN
CASH, INTERESTS IN MUTUAL FUNDS, SECURITIES, OR OTHER PROPERTY OR IN A
COMBINATION THEREOF, AS THE PARTIES MAY AGREE, BUT, TO THE EXTENT PRACTICABLE,
SHALL BE INVESTED INITIALLY IN COMPARABLE INVESTMENT OPTIONS IN THE SPINCO
SAVINGS PLAN AS SUCH ACCOUNTS WERE INVESTED IMMEDIATELY BEFORE THE DATE OF
TRANSFER.  ANY OUTSTANDING LOAN BALANCES UNDER ANY SUPPLIER SAVINGS PLANS TO
ACTIVE SPINCO EMPLOYEES AND FORMER SPINCO EMPLOYEES SHALL ALSO BE TRANSFERRED
WITH THE UNDERLYING ACCOUNTS.  AFTER THE TRANSFER, (I) ACTIVE AND FORMER SPINCO
EMPLOYEES WILL BE ABLE TO SELL THE SUPPLIER COMMON STOCK HELD IN THEIR ACCOUNT
UNDER THE SPINCO SAVINGS PLAN, AND (II) ACTIVE AND FORMER SUPPLIER EMPLOYEES
WILL BE ABLE TO SELL THE SPINCO COMMON STOCK HELD IN THEIR ACCOUNT UNDER THE
SUPPLIER SAVINGS PLAN.

 

(E)                                  SPINCO SHALL APPLY TO THE IRS FOR FAVORABLE
DETERMINATION LETTERS WITH RESPECT TO THE TAX-QUALIFIED STATUS OF THE SPINCO
SAVINGS PLAN AS SOON AS PRACTICABLE AFTER THE TRANSITION END DATE, AND SPINCO,
CONSISTENT WITH THE TERMS OF THIS AGREEMENT, SHALL MAKE SUCH AMENDMENTS TO SUCH
SAVINGS PLANS AS MAY BE REQUIRED BY THE IRS IN ORDER FOR SPINCO TO RECEIVE
FAVORABLE DETERMINATION LETTERS WITH RESPECT TO THESE PLANS.

 

(F)                                    AFTER THE TRANSITION END DATE, ALL
BENEFICIARY DESIGNATIONS MADE BY ACTIVE SPINCO EMPLOYEES OR THEIR RESPECTIVE
ALTERNATE PAYEES WITH RESPECT TO THE SUPPLIER SAVINGS PLAN SHALL BE TRANSFERRED
TO AND BE IN FULL FORCE AND EFFECT UNDER THE SPINCO SAVINGS PLANS UNTIL SUCH
BENEFICIARY DESIGNATIONS ARE REPLACED OR REVOKED BY THE INDIVIDUAL WHO MADE SUCH
BENEFICIARY DESIGNATION.

 

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3.3                               GOVERNMENTAL FILINGS.  SUPPLIER AND SPINCO
SHALL COOPERATE TO MAKE ANY AND ALL FILINGS REQUIRED WITH RESPECT TO THE
SUPPLIER SAVINGS PLANS AND THE SPINCO SAVINGS PLANS UNDER THE CODE OR ERISA OR
IN CONNECTION WITH ANY OF THE TRANSACTIONS DESCRIBED IN THIS ARTICLE III.

 

ARTICLE IV
WELFARE PLANS

 

4.1                               CONTINUATION IN SUPPLIER WELFARE PLANS

 

(A)                                  SPINCO WILL TAKE ALL SUCH ACTIONS AS ARE
NECESSARY TO ADOPT THE SUPPLIER WELFARE PLANS, EFFECTIVE AS OF THE DISTRIBUTION
DATE; SUCH ADOPTION SHALL BE LIMITED BY THIS AGREEMENT AND SHALL SOLELY RELATE
TO THE SPINCO EMPLOYEES AND ANY NEW EMPLOYEES OF SPINCO WHO BECOME ELIGIBLE TO
PARTICIPATE IN THE SUPPLIER WELFARE PLAN.  SUPPLIER HEREBY CONSENTS TO THE
ADOPTION OF THE PLAN BY SPINCO AND AGREES TO TAKE ALL SUCH ACTIONS AS ARE
REASONABLY NECESSARY TO FACILITATE THE ADOPTION OF THE WELFARE PLANS BY SPINCO. 
SUPPLIER AND SPINCO AGREE TO COOPERATE AND SHARE THE COSTS ON A PRO RATA BASIS
(DETERMINED BY NUMBER OF PARTICIPANTS IN THE RELEVANT WELFARE PLAN WHO ARE
ACTIVE OR FORMER SPINCO OR SUPPLIER EMPLOYEES) OF (I) COMMUNICATING WITH THE
INSURANCE COMPANIES, HMOS AND ALL OTHER PROVIDERS OR THIRD-PARTY ADMINISTRATORS
WITH RESPECT TO THE BENEFITS PROVIDED UNDER THE WELFARE PLANS, AND (II)
COMMUNICATING WITH WELFARE PLAN PARTICIPANTS, INCLUDING PROVIDING ANY SUMMARY OF
MATERIAL MODIFICATIONS NECESSARY UNDER ERISA.  SPINCO AND SUPPLIER ACKNOWLEDGE
AND UNDERSTAND THAT THE SUPPLIER WELFARE PLANS WILL BE “MULTIPLE EMPLOYER
WELFARE ARRANGEMENTS” WITHIN THE MEANING OF SECTION 3 (40) ERISA.

 

(B)                                 SUPPLIER, AS THE PRIMARY EMPLOYER UNDER THE
WELFARE PLAN, HEREBY AGREES TO RETAIN SOLE RESPONSIBILITY FOR (I) AMENDING THE
PLAN FOR PURPOSES OF MAINTAINING COMPLIANCE WITH THE PROVISIONS OF ERISA AND
(II) CORRECTING ANY FIDUCIARY VIOLATIONS WITH THE DOL.  SUPPLIER AND SPINCO
SHALL SHARE A PRO RATA PORTION (DETERMINED BY NUMBER OF PARTICIPANTS IN THE
RELEVANT WELFARE PLAN WHO ARE ACTIVE OR FORMER SPINCO OR SUPPLIER EMPLOYEES) OF
THE COSTS AND EXPENSES ASSOCIATED WITH EACH OF THE FOREGOING PROVISIONS
(RELATING TO THE PERIOD AFTER ADOPTION BY SUPPLIER WITH RESPECT TO SUPPLIER’S
EMPLOYEES AND FORMER EMPLOYEES WHO PARTICIPATE OR PARTICIPATED IN THE PLANS DUE
TO THEIR EMPLOYMENT WITH SUPPLIER), EXCEPT PARAGRAPH (II). THE COSTS OF
PARAGRAPH (II) SHALL BE BORNE BY SUPPLIER.

 

(C)                                  SPINCO HEREBY AGREES TO (I) WITHHOLD ALL
EMPLOYEE CONTRIBUTIONS AND MAKE ALL EMPLOYER CONTRIBUTIONS AS REQUIRED BY ANY
APPLICABLE SUPPLIER WELFARE PLAN, AND PAY SUCH CONTRIBUTIONS AS DIRECTED BY THE
SUPPLIER AND (II) NOTIFY THE SUPPLIER REGARDING ANY CHANGES OF STATUS OR
TERMINATION OF EMPLOYMENT BY ANY SPINCO EMPLOYEES, SPINCO FORMER EMPLOYEES OR
BENEFICIARIES WHO ARE PARTICIPANTS IN THE WELFARE PLANS, WITHIN THE MEANING OF
SECTION 125 OF THE CODE AND THE REGULATIONS THEREUNDER.

 

(D)                                 VENDOR CONTRACTS.

 

(I)                                     BEFORE THE DISTRIBUTION DATE, SUPPLIER
SHALL TAKE SUCH STEPS AS ARE NECESSARY UNDER EACH ASO CONTRACT, GROUP INSURANCE
POLICY AND HMO AGREEMENT IN EXISTENCE AS OF THE DATE OF THIS AGREEMENT TO PERMIT
SPINCO TO PARTICIPATE IN THE TERMS AND CONDITIONS OF SUCH ASO CONTRACT, GROUP
INSURANCE POLICY OR HMO AGREEMENT BEGINNING IMMEDIATELY AFTER THE DISTRIBUTION
DATE.

 

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(II)                                  SUPPLIER SHALL DETERMINE, AND SHALL
PROMPTLY NOTIFY SPINCO OF, THE MANNER IN WHICH SPINCO’S PARTICIPATION IN THE
TERMS AND CONDITIONS OF ASO CONTRACTS, GROUP INSURANCE POLICIES AND HMO
AGREEMENTS, AS SET FORTH ABOVE IS TO BE EFFECTUATED.  SPINCO HEREBY AUTHORIZES
SUPPLIER TO ACT ON ITS BEHALF TO EXTEND TO SPINCO THE TERMS AND CONDITIONS OF
THE ASO CONTRACTS, GROUP INSURANCE POLICIES AND HMO AGREEMENTS DURING THE
TRANSITION PERIOD.  SPINCO SHALL FULLY COOPERATE WITH SUPPLIER IN SUCH EFFORTS.

 

(III)                               SUPPLIER AND SPINCO SHALL USE THEIR
REASONABLE BEST EFFORTS TO CAUSE EACH OF THE INSURANCE COMPANIES, HMOS, PAID
PROVIDER ORGANIZATIONS AND THIRD-PARTY ADMINISTRATORS PROVIDING SERVICES AND
BENEFITS UNDER THE SUPPLIER WELFARE PLANS AND THE SPINCO WELFARE PLANS TO
MAINTAIN THE PREMIUM AND/OR ADMINISTRATIVE RATES, BASED ON THE AGGREGATE NUMBER
OF PARTICIPANTS IN BOTH THE SUPPLIER WELFARE PLANS, DURING THE TRANSITION
PERIOD, AND THE SPINCO WELFARE PLANS.

 

(IV)                              FOR THE TRANSITION PERIOD, SPINCO SHALL BE
RESPONSIBLE, SUBJECT TO THE DIRECTION AND CONTROL OF SUPPLIER, FOR THE
MANAGEMENT OF THE EXISTING CONTRACTUAL AND OTHER ARRANGEMENTS PERTAINING TO THE
ADMINISTRATION OF THE SPINCO WELFARE PLANS.  IMMEDIATELY AFTER THE DISTRIBUTION
DATE, SPINCO SHALL BE RESPONSIBLE FOR THE MANAGEMENT AND CONTROL OF THE ASO
CONTRACTS, GROUP INSURANCE POLICIES AND HMO AGREEMENTS AND OTHER VENDOR
CONTRACTS AND RELATIONSHIPS TO THE EXTENT SUCH CONTRACTS, POLICIES AND
AGREEMENTS APPLY TO THE SPINCO WELFARE PLANS.  NOTWITHSTANDING THE FOREGOING,
NOTHING CONTAINED IN THIS SECTION 4.1(D)(IV) SHALL PERMIT SPINCO TO DIRECT ANY
INSURANCE CARRIER, THIRD-PARTY VENDOR OR CLAIMS ADMINISTRATOR WITH RESPECT TO
ANY CONTRACTUAL ARRANGEMENT, POLICY OR AGREEMENT UNDER ANY SUPPLIER WELFARE
PLAN.

 

(E)                                  FOR THE PERIOD BEFORE THE DISTRIBUTION DATE
AND FOR THE TRANSITION PERIOD, SUPPLIER SHALL BE RESPONSIBLE FOR ADMINISTERING
COMPLIANCE WITH THE CONTINUATION COVERAGE REQUIREMENTS FOR “GROUP HEALTH PLANS”
UNDER TITLE X OF COBRA, AND THE PORTABILITY REQUIREMENTS UNDER HIPAA, WITH
RESPECT TO ACTIVE SPINCO EMPLOYEES, FORMER SPINCO EMPLOYEES AND THEIR
BENEFICIARIES AND SHALL BE RESPONSIBLE FOR FURNISHING ALL NECESSARY EMPLOYEE
CHANGE NOTICES WITH RESPECT TO THESE PERSONS IN ACCORDANCE WITH APPLICABLE
SUPPLIER POLICIES AND PROCEDURES.  FOLLOWING THE TIME PERIODS DESCRIBED IN THE
PRECEDING SENTENCE, SPINCO SHALL BE SOLELY RESPONSIBLE FOR ADMINISTERING
COMPLIANCE WITH AND SATISFYING ANY OUTSTANDING COBRA OR HIPAA OBLIGATION WITH
RESPECT TO ACTIVE SPINCO EMPLOYEES, FORMER SPINCO EMPLOYEES AND THEIR
BENEFICIARIES.

 

(F)                                    IF SPINCO RECOVERS ANY AMOUNTS THROUGH
SUBROGATION OR REIMBURSEMENT FOR CLAIMS PAID BY SUPPLIER TO ACTIVE SPINCO
EMPLOYEES, FORMER SPINCO EMPLOYEES OR THEIR BENEFICIARIES, SPINCO SHALL PAY SUCH
AMOUNTS TO SUPPLIER.

 

4.2                               ESTABLISHMENT OF WELFARE PLANS.  EFFECTIVE AS
OF THE TRANSITION END DATE, SPINCO SHALL TAKE ALL ACTIONS NECESSARY OR
APPROPRIATE TO ESTABLISH THE SPINCO WELFARE PLANS TO PROVIDE ACTIVE SPINCO
EMPLOYEES (AND FORMER SPINCO EMPLOYEES, IF APPLICABLE) THOSE BENEFITS IT
DETERMINES IN ITS SOLE DISCRETION.  SPINCO SHALL PROVIDE COVERAGE TO ACTIVE
SPINCO EMPLOYEES (AND FORMER SPINCO EMPLOYEES, IF APPLICABLE) UNDER SUCH SPINCO
WELFARE PLANS WITHOUT THE NEED TO UNDERGO A PHYSICAL EXAMINATION OR OTHERWISE
PROVIDE EVIDENCE OF INSURABILITY, WILL NOT IMPOSE PRE-EXISTING CONDITION
EXCLUSIONS AND WILL RECOGNIZE AND MAINTAIN ALL IRREVOCABLE ASSIGNMENTS

 

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AND ELECTIONS MADE BY ACTIVE SPINCO EMPLOYEES (AND FORMER SPINCO EMPLOYEES, IF
APPLICABLE) IN CONNECTION WITH ANY LIFE INSURANCE COVERAGE UNDER THE SUPPLIER
WELFARE PLANS.

 

4.3                               VACATION AND SICK PAY LIABILITIES.  EFFECTIVE
AS OF THE DISTRIBUTION DATE, SPINCO SHALL ASSUME ALL LIABILITIES FOR VACATION,
SICK LEAVE AND OTHER PAID TIME OFF IN RESPECT OF ALL ACTIVE SPINCO EMPLOYEES
(AND FORMER SPINCO EMPLOYEES, IF APPLICABLE) AS OF THE DISTRIBUTION DATE.

 

4.4                               MEDICAL SPENDING/DEPENDENT CARE ACCOUNTS.  AS
SOON AS PRACTICABLE AFTER THE TRANSITION END DATE, SUPPLIER SHALL REIMBURSE
SPINCO FOR THE AGGREGATE CONTRIBUTIONS TO SUCH ACCOUNTS WITHHELD BY SUPPLIER
FROM ACTIVE SPINCO EMPLOYEES (AND FORMER SPINCO EMPLOYEES, IF APPLICABLE) PRIOR
TO THE DISTRIBUTION DATE TO THE EXTENT THAT SUPPLIER DID NOT EXHAUST SUCH
CONTRIBUTIONS BY PROVIDING BENEFITS TO ACTIVE SPINCO EMPLOYEES (AND FORMER
SPINCO EMPLOYEES, IF APPLICABLE) PRIOR TO THE DISTRIBUTION DATE, OR IF BENEFITS
PAID BY SUPPLIER TO ACTIVE SPINCO EMPLOYEES (AND FORMER SPINCO EMPLOYEES, IF
APPLICABLE) PRIOR TO THE DISTRIBUTION DATE EXCEEDS THE CONTRIBUTIONS WITHHELD BY
SUPPLIER FROM ACTIVE SPINCO EMPLOYEES (AND FORMER SPINCO EMPLOYEES, IF
APPLICABLE), SPINCO SHALL REIMBURSE SUPPLIER FOR SUCH DIFFERENCE.

 

4.5                               SEVERANCE.  THE PARTIES AGREE THAT, WITH
RESPECT TO ACTIVE SPINCO EMPLOYEES WHO, IN CONNECTION WITH THE DISTRIBUTION,
CEASE TO BE EMPLOYEES OF SUPPLIER AND BECOME EMPLOYEES OF SPINCO, SUCH CESSATION
SHALL NOT BE DEEMED A SEVERANCE OF EMPLOYMENT FOR PURPOSES OF ANY PLAN THAT
PROVIDES FOR THE PAYMENT OF SEVERANCE, SALARY CONTINUATION OR SIMILAR BENEFITS. 
THE PARTIES SHALL TAKE ALL SUCH ACTION, INCLUDING, BUT NOT LIMITED TO, AMENDING
ANY PLAN TO GIVE EFFECT TO THE PROVISIONS OF THIS SECTION.

 

4.6                               WORKERS’ COMPENSATION AND UNEMPLOYMENT
COMPENSATION.  EFFECTIVE AS OF THE DISTRIBUTION DATE, SPINCO SHALL ASSUME ALL
LIABILITIES FOR ACTIVE SPINCO EMPLOYEES AND FORMER SPINCO EMPLOYEES RELATED TO
ANY AND ALL WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION MATTERS UNDER
ANY LAW OF ANY STATE, TERRITORY, OR POSSESSION OF THE UNITED STATES OR THE
DISTRICT OF COLUMBIA AND SPINCO SHALL BE FULLY RESPONSIBLE FOR THE
ADMINISTRATION OF ALL SUCH CLAIMS.  IF SPINCO IS UNABLE TO ASSUME ANY OF SUCH
LIABILITIES OR THE ADMINISTRATION OF ANY SUCH CLAIM BECAUSE OF THE OPERATION OF
APPLICABLE STATE LAW OR FOR ANY OTHER REASON, SPINCO SHALL REIMBURSE SUPPLIER
FOR ALL SUCH LIABILITIES.

 

4.7                               HIPAA BUSINESS ASSOCIATE PROVISIONS.

 

(A)                                  DEFINITIONS.  FOR PURPOSES OF THIS
SECTION 4.7, THE FOLLOWING WORDS AND PHRASES SHALL HAVE THE MEANINGS SET FORTH
BELOW.

 

(I)                                     “DESIGNATED RECORD SET” SHALL HAVE THE
MEANING SET OUT IN ITS DEFINITION AT 45 C.F.R. §164.501, AS SUCH PROVISION IS
CURRENTLY DRAFTED AND AS SUBSEQUENTLY AMENDED.

 

(II)                                  “RECORD” MEANS ANY ITEM, COLLECTION, OR
GROUPING OF INFORMATION THAT INCLUDES PROTECTED HEALTH INFORMATION AND IS
MAINTAINED, COLLECTED, USED, OR DISSEMINATED BY OR FOR SPINCO.

 

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(III)                               “INDIVIDUALLY IDENTIFIABLE HEALTH
INFORMATION” SHALL HAVE THE MEANING SET OUT IN ITS DEFINITION AT 45 C.F.R.
§164.501, AS SUCH PROVISION IS CURRENTLY DRAFTED AND AS SUBSEQUENTLY AMENDED.

 

(IV)                              “PRIVACY STANDARDS” SHALL MEAN THE STANDARDS
FOR PRIVACY OF INDIVIDUALLY IDENTIFIABLE HEALTH INFORMATION PROMULGATED UNDER
HIPAA.

 

(V)                                 “PROTECTED HEALTH INFORMATION” OR (“PHI”)
SHALL HAVE THE MEANING SET OUT IN ITS DEFINITION AT 45 C.F.R. §164.501, AS SUCH
PROVISION IS CURRENTLY DRAFTED AND AS SUBSEQUENTLY AMENDED.

 

(B)                                 USE AND DISCLOSURE OF PHI.  SUPPLIER MAY USE
AND DISCLOSE PHI RECEIVED FROM SPINCO OR CREATED OR RECEIVED BY SUPPLIER ON
BEHALF OF SPINCO SOLELY AS PERMITTED OR REQUIRED BY THIS AGREEMENT OR AS
OTHERWISE REQUIRED BY LAW.  SUPPLIER SHALL NOT USE AND DISCLOSE PHI RECEIVED
FROM SPINCO OR CREATED OR RECEIVED BY SUPPLIER ON BEHALF OF SPINCO IN ANY MANNER
THAT WOULD CONSTITUTE A VIOLATION OF THE PRIVACY STANDARDS IF USED IN SUCH
MANNER BY SPINCO.

 

(C)                                  SAFEGUARDS.  SUPPLIER AGREES THAT IT WILL
USE COMMERCIALLY REASONABLE EFFORTS TO SAFEGUARD PHI AND TO PREVENT USE OR
DISCLOSURE OF PHI OTHER THAN AS PROVIDED FOR UNDER THIS SECTION 4.7.

 

(D)                                 REPORTING OF DISCLOSURES OF PHI.  SUPPLIER
SHALL REPORT TO SPINCO ANY USE OR DISCLOSURE OF PHI IN VIOLATION OF THIS
SECTION 4.7 OF WHICH IT BECOMES AWARE.

 

(E)                                  AGREEMENTS WITH THIRD PARTIES.  SUPPLIER
SHALL OBTAIN AGREEMENT WITH ANY AGENT OR SUBCONTRACTOR THAT WILL HAVE ACCESS TO
PHI THAT IS RECEIVED FROM, OR CREATED OR RECEIVED BY SUPPLIER ON BEHALF OF
SPINCO, TO BE BOUND BY THE SAME RESTRICTIONS, TERMS, AND CONDITIONS THAT APPLY
TO SUPPLIER PURSUANT TO THIS SECTION 4.7 WITH RESPECT TO SUCH PHI.

 

(F)                                    ACCESS TO INFORMATION. WITHIN TWENTY-FIVE
(25) DAYS OF RECEIPT OF A REQUEST BY SPINCO FOR ACCESS TO PHI IN A DESIGNATED
RECORD SET CONCERNING AN INDIVIDUAL WHOSE PHI IS HELD BY SUPPLIER UNDER THIS
AGREEMENT, SUPPLIER WILL PROVIDE SUCH ACCESS TO AN INDIVIDUAL IN ACCORDANCE WITH
45 C.F.R. § 164.524.

 

(G)                                 AVAILABILITY OF PHI FOR AMENDMENT.  WITHIN
FIFTY (50) DAYS OF RECEIPT OF A REQUEST FROM SPINCO FOR THE AMENDMENT OF AN
INDIVIDUAL’S PHI CONTAINED IN A DESIGNATED RECORD SET, SUPPLIER AGREES TO MAKE
ANY AMENDMENT TO PHI IN A DESIGNATED RECORD SET THAT SPINCO DIRECTS OR AGREES TO
PURSUANT TO 45 C.F.R. §164.526.

 

(H)                                 ACCOUNTING OF DISCLOSURES.  WITHIN FIFTY
(50) DAYS OF RECEIPT OF A NOTICE FROM SPINCO TO SUPPLIER STATING THAT SPINCO HAS
RECEIVED A REQUEST FOR AN ACCOUNTING OF DISCLOSURES OF PHI REGARDING AN
INDIVIDUAL, SUPPLIER SHALL MAKE AVAILABLE TO SPINCO SUCH INFORMATION AS IS IN
SUPPLIER’S POSSESSION AND IS REQUIRED FOR SPINCO TO MAKE THE ACCOUNTING UNDER
45 C.F.R. §164.528.  SUPPLIER AGREES TO DOCUMENT SUCH DISCLOSURES OF PHI AND
INFORMATION RELATED TO SUCH DISCLOSURES AS WOULD BE REQUIRED FOR SPINCO TO
RESPOND TO A REQUEST BY AN INDIVIDUAL FOR AN ACCOUNTING OF DISCLOSURES OF PHI IN
ACCORDANCE WITH 45 C.F.R. § 164.528.

 

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(I)                                     AVAILABILITY OF BOOKS AND RECORDS. 
SUPPLIER AGREES TO MAKE ITS INTERNAL POLICIES, PROCEDURES, PRACTICES, BOOKS,
RECORDS AND AGREEMENTS RELATING TO THE USE AND DISCLOSURE OF PHI RECEIVED FROM,
OR CREATED OR RECEIVED BY SUPPLIER ON BEHALF OF, SPINCO AVAILABLE TO THE
SECRETARY OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES (“SECRETARY”) FOR
PURPOSES OF DETERMINING SPINCO’S COMPLIANCE WITH THE PRIVACY STANDARDS, SUBJECT
TO ATTORNEY-CLIENT AND OTHER APPLICABLE LEGAL PRIVILEGES.

 

(J)                                     RETURN OF PHI UPON TERMINATION.  UPON
TERMINATION OF THE AGREEMENT FOR ANY REASON, SUPPLIER SHALL RETURN TO SPINCO ALL
PHI RECEIVED FROM SPINCO OR CREATED OR RECEIVED BY SUPPLIER ON BEHALF OF SPINCO
AND WHICH SUPPLIER STILL MAINTAINS IN ANY FORM.  PRIOR TO DOING SO, SUPPLIER
FURTHER AGREES TO RECOVER ANY PHI IN THE POSSESSION OF ITS SUBCONTRACTORS OR
AGENTS.  SUPPLIER SHALL NOT RETAIN ANY COPIES OF SUCH PHI.  IF IT IS NOT
FEASIBLE TO RETURN SUCH PHI AS DETERMINED BY SPINCO, SUPPLIER AGREES TO EXTEND
ANY AND ALL PROTECTIONS, LIMITATIONS, AND RESTRICTIONS IN THIS SECTION 4.7 TO
SUPPLIER’S USE AND DISCLOSURE OF ANY PHI RETAINED AFTER THE TERMINATION OF THE
AGREEMENT, AND TO LIMIT ANY FURTHER USES AND DISCLOSURES TO THE PURPOSE OR
PURPOSES THAT MAKE THE RETURN OF PHI INFEASIBLE.  IF IT IS NOT FEASIBLE FOR
SUPPLIER TO OBTAIN FROM A SUBCONTRACTOR OR AGENT ANY PHI IN THE POSSESSION OF
THE SUBCONTRACTOR OR AGENT, SUPPLIER WILL REQUIRE THE SUBCONTRACTOR AND/OR AGENT
TO AGREE TO EXTEND ANY AND ALL PROTECTIONS, LIMITATIONS, AND RESTRICTIONS IN
THIS SECTION 4.7 TO THE SUBCONTRACTORS’ AND/OR AGENTS’ USE AND DISCLOSURE OF ANY
PHI RETAINED AFTER THE TERMINATION OF THE AGREEMENT, AND TO LIMIT ANY FURTHER
USES AND DISCLOSURES TO THE PURPOSES THAT MAKE THE RETURN OF THE PHI INFEASIBLE.

 

(K)                                  TERMINATION.  PURSUANT TO 45 C.F.R.
§164.504(E)(2)(III), SPINCO MAY UPON TEN (10) DAYS NOTICE TERMINATE THE
PROVISIONS OF ANY AGREEMENT THAT RELATES TO THE ADMINISTRATION OF ANY WELFARE
PLAN DETERMINED TO BE A HEALTH PLAN UNDER THE PRIVACY STANDARDS IF SPINCO
DETERMINES THAT SUPPLIER HAS BREACHED A MATERIAL TERM OF THIS SECTION 4.7. 
ALTERNATIVELY, SPINCO MAY (I) PROVIDE SUPPLIER WITH 30 DAYS WRITTEN NOTICE OF
THE EXISTENCE OF AN ALLEGED MATERIAL BREACH; AND (II) AFFORD SUPPLIER AN
OPPORTUNITY TO CURE SAID ALLEGED MATERIAL BREACH TO SPINCO’S SATISFACTION WITHIN
THE STATED TIME PERIOD.  FAILURE TO CURE THE ALLEGED BREACH IS GROUNDS FOR
IMMEDIATE TERMINATION OF THE PROVISIONS OF ANY AGREEMENT THAT RELATES TO THE
ADMINISTRATION OF ANY WELFARE PLAN DETERMINED TO BE A HEALTH PLAN UNDER THE
PRIVACY STANDARDS; PROVIDED, HOWEVER, THAT IN THE EVENT THAT SPINCO DETERMINES
THAT SUCH TERMINATION IS NOT FEASIBLE, SUPPLIER HEREBY ACKNOWLEDGES THAT SPINCO
SHALL HAVE THE RIGHT TO REPORT THE BREACH TO THE SECRETARY, NOTWITHSTANDING ANY
OTHER PROVISION OF THE AGREEMENT TO THE CONTRARY.  SPINCO RESERVES THE RIGHT TO
CURE ANY BREACH BY SUPPLIER OF ANY PROVISION OF THIS SECTION 4.7; PROVIDED,
HOWEVER, THAT SPINCO RETAINS ITS RIGHT TO TERMINATE RELEVANT PROVISION OF AN
AGREEMENT AS PROVIDED UNDER THIS SECTION 4.7(K) AND ITS RIGHT TO SEEK RELATED
REMEDIES, EVEN IF SPINCO IS ABLE TO CURE THE BREACH.

 

(L)                                     SPINCO’S OBLIGATIONS.  SPINCO SHALL
NOTIFY SUPPLIER OF ANY LIMITATION(S) IN ITS NOTICE OF PRIVACY PRACTICES, TO THE
EXTENT THAT SUCH LIMITATION MAY AFFECT SUPPLIER’S USE OR DISCLOSURE OF PHI. 
SPINCO ALSO SHALL NOTIFY SUPPLIER OF ANY CHANGES IN, OR REVOCATION OF,
PERMISSION BY AN INDIVIDUAL TO USE OR DISCLOSE PHI, TO THE EXTENT THAT SUCH
CHANGES MAY AFFECT SUPPLIER’S USE OR DISCLOSURE OF PHI.  SPINCO ALSO SHALL
NOTIFY SUPPLIER OF ANY RESTRICTION TO THE USE OR DISCLOSURE OF PHI THAT SPINCO
HAS AGREED TO IN ACCORDANCE WITH 45 C.F.R. § 164.522, TO THE EXTENT THAT SUCH
RESTRICTION MAY AFFECT SUPPLIER’S USE OR DISCLOSURE OF PHI.

 

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(M)                               MANAGEMENT AND ADMINISTRATION.  EXCEPT AS
OTHERWISE LIMITED IN THIS AGREEMENT, SUPPLIER MAY USE PHI FOR THE PROPER
MANAGEMENT AND ADMINISTRATION OF THE SPINCO HEALTH PLAN OR TO CARRY OUT THE
LEGAL RESPONSIBILITIES OF SUPPLIER.  EXCEPT AS OTHERWISE LIMITED IN THIS
AGREEMENT, SUPPLIER MAY DISCLOSE PHI FOR THE PROPER MANAGEMENT AND
ADMINISTRATION OF THE SPINCO HEALTH PLAN, PROVIDED THAT DISCLOSURES ARE REQUIRED
BY LAW, OR SUPPLIER OBTAINS REASONABLE ASSURANCES FROM THE PERSON TO WHOM THE
INFORMATION IS DISCLOSED THAT IT WILL REMAIN CONFIDENTIAL AND USED OR FURTHER
DISCLOSED ONLY AS REQUIRED BY LAW OR FOR THE PURPOSES FOR WHICH IT WAS DISCLOSED
TO THE PERSON.  THE PERSON ALSO MUST AGREE TO NOTIFY SUPPLIER OF ANY INSTANCES
OF WHICH IT IS AWARE IN WHICH THE CONFIDENTIALITY OF THE INFORMATION HAS BEEN
BREACHED.

 

(N)                                 AMENDMENT.  THE PARTIES AGREE TO TAKE SUCH
ACTION AS IS NECESSARY TO AMEND THIS SECTION 4.7 FROM TIME TO TIME AS IS
NECESSARY FOR SPINCO TO COMPLY WITH THE REQUIREMENTS OF THE PRIVACY STANDARDS.

 

ARTICLE V
EXECUTIVE COMPENSATION PROGRAMS

 

5.1                               SUPPLIER NON-QUALIFIED PLAN.

 

(A)                                  ALL ACTIVE SPINCO EMPLOYEES SHALL CEASE TO
BE ELIGIBLE TO PARTICIPATE IN THE SUPPLIER NON-QUALIFIED PLAN AS OF THE
DISTRIBUTION DATE.

 

(B)                                 EFFECTIVE AS OF THE DISTRIBUTION DATE, (I)
SPINCO SHALL ASSUME ALL LIABILITIES IN CONNECTION WITH THE SUPPLIER
NON-QUALIFIED PLAN FOR ACTIVE SPINCO EMPLOYEES (AND FORMER SPINCO EMPLOYEES, IF
APPLICABLE) AND SUPPLIER SHALL HAVE NO RESPONSIBILITY WITH RESPECT TO SUCH
LIABILITIES, (II) TO THE EXTENT THOSE LIABILITIES ARE FUNDED BY A RABBI TRUST,
THE ASSETS RELATING TO ACTIVE SPINCO EMPLOYEES (AND FORMER SPINCO EMPLOYEES, IF
APPLICABLE), SHALL BE TRANSFERRED TO SPINCO OR A RABBI TRUST DESIGNATED BY
SPINCO AS SOON AS PRACTICABLE FOLLOWING THE DISTRIBUTION DATE, (III) SPINCO
SHALL ESTABLISH A NON-QUALIFIED DEFERRED COMPENSATION PLAN ON SUCH TERMS AS IT
DETERMINES IN ITS SOLE DISCRETION (“SPINCO NON-QUALIFIED PLAN”), AND (IV) AS
APPLICABLE, ALL SERVICE RECOGNIZED UNDER THE SUPPLIER NON-QUALIFIED PLAN (FOR
PERIODS IMMEDIATELY BEFORE THE DISTRIBUTION DATE) SHALL, AS OF IMMEDIATELY AFTER
THE DISTRIBUTION DATE, BE RECOGNIZED AND TAKEN INTO ACCOUNT UNDER THE SPINCO
NON-QUALIFIED PLAN.

 

5.2                               BONUS PLANS.  SPINCO SHALL ASSUME ALL
LIABILITIES FOR OR RELATED TO ACTIVE SPINCO EMPLOYEES (AND FORMER SPINCO
EMPLOYEES, IF APPLICABLE) PAYABLE UNDER ANY BONUS PLAN SPONSORED OR MAINTAINED
BY SPINCO OR SUPPLIER WITH RESPECT TO THE PERIOD PRIOR TO THE DISTRIBUTION DATE;
PROVIDED, HOWEVER, THAT SUPPLIER AND SPINCO MAY JOINTLY MAKE SUCH ADJUSTMENTS TO
THE FINANCIAL GOALS, TARGETS, PAYMENTS AND FORMS OF PAYMENT AS THEY DEEM
APPROPRIATE TO REFLECT THE DISTRIBUTION.  AS OF THE DISTRIBUTION DATE, SPINCO
MAY ESTABLISH A BONUS PLAN COVERING SUCH OF ITS ACTIVE SPINCO EMPLOYEES AS IT IN
ITS SOLE DISCRETION DEEMS APPROPRIATE.

 

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ARTICLE VI
STOCK INCENTIVE PLANS

 

6.1                               STOCK OPTION AWARDS.

 

(A)                                  EFFECTIVE AS OF THE DISTRIBUTION DATE,
SPINCO SHALL ESTABLISH AN EQUITY-BASED INCENTIVE PLAN FOR THE BENEFIT OF
SPINCO’S EMPLOYEES, CONSULTANTS AND DIRECTORS (“SPINCO STOCK INCENTIVE PLAN”),
WITH SUCH TERMS AS SPINCO DETERMINES, IN ITS SOLE DISCRETION.

 

(B)                                 EXCEPT AS PROVIDED IN SECTION 6.1(C) FOR KEY
RECIPIENTS AND SECTION 6.1(D) FOR DIRECTOR RECIPIENTS, EMPLOYEES AND CONSULTANTS
WHO HAVE RECEIVED UNEXERCISED OPTIONS (WHETHER VESTED OR UNVESTED) TO PURCHASE
SUPPLIER COMMON STOCK (“SUPPLIER OPTIONS”) UNDER THE SUPPLIER STOCK INCENTIVE
PLANS BEFORE THE DISTRIBUTION DATE, AND WHO BECOME EMPLOYEES OR CONSULTANTS OF
SPINCO ON THE DISTRIBUTION DATE, WILL HAVE EACH OF THEIR UNEXERCISED SUPPLIER
OPTIONS CONVERTED INTO OPTIONS TO PURCHASE SPINCO COMMON STOCK (“SPINCO
OPTIONS”) UNDER THE SPINCO STOCK INCENTIVE PLAN AS OF THE DISTRIBUTION DATE,
SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS:

 

(I)                                     THE TERMS OF THE CONVERSION DESCRIBED IN
THIS SECTION WILL BE DETERMINED BY REFERENCE TO, AND IN CONSIDERATION OF, THE
RATIO OF THE MARKET PRICE OF SUPPLIER COMMON STOCK AND SPINCO COMMON STOCK
IMMEDIATELY BEFORE OR AFTER THE DISTRIBUTION.  THE CONVERSION WILL PRESERVE THE
THEN INTRINSIC VALUE OF THE EXISTING SUPPLIER OPTIONS.  FOLLOWING THE CONVERSION
CONTEMPLATED BY THIS SECTION, THE AGGREGATE MARKET VALUE OF THE SPINCO COMMON
STOCK PURCHASABLE UNDER THE SPINCO OPTIONS IMMEDIATELY AFTER THE DISTRIBUTION
WILL BE APPROXIMATELY EQUAL TO THE AGGREGATE MARKET VALUE OF THE SUPPLIER COMMON
STOCK THAT WAS PURCHASABLE UNDER THE SUPPLIER OPTIONS IMMEDIATELY BEFORE THE
DISTRIBUTION, WITH THE AGGREGATE EXERCISE PRICE OF THE SPINCO OPTIONS BEING THE
SAME AS THE SUPPLIER OPTIONS (EXCEPT TO THE EXTENT THE NUMBER OF SHARES
PURCHASABLE IS ROUNDED DOWN TO THE NEAREST WHOLE SHARE).

 

(II)                                  THE TERM, VESTING AND OTHER TERMS OF THE
SPINCO OPTIONS WILL BE THE SAME AS THE TERMS OF THE CURRENT SUPPLIER OPTIONS;
NOTWITHSTANDING ANY CONTRARY PROVISION OF THE SPINCO STOCK INCENTIVE PLAN.

 

(C)                                  EACH KEY RECIPIENT OF SUPPLIER OPTIONS
UNDER THE SUPPLIER STOCK INCENTIVE PLANS BEFORE THE DISTRIBUTION DATE WHO
BECOMES AN EMPLOYEE OR CONSULTANT OF SPINCO ON THE DISTRIBUTION DATE, WILL, HAVE
30% OF HIS OR HER UNEXERCISED VESTED SUPPLIER OPTIONS CONVERTED INTO SPINCO
OPTIONS UNDER THE SPINCO STOCK INCENTIVE PLAN AS OF THE DISTRIBUTION DATE.  THE
REMAINING 70% OF HIS OR HER VESTED, UNEXERCISED SUPPLIER OPTIONS SHALL REMAIN
UNDER THE TERMS OF THE SUPPLIER STOCK INCENTIVE PLAN (“KEY SUPPLIER OPTIONS”). 
UNVESTED SUPPLIER OPTIONS HELD BY KEY RECIPIENTS (OTHER THAN THE DESIGNATED KEY
RECIPIENT IDENTIFIED ON SCHEDULE I) WILL BE CONVERTED INTO SPINCO OPTIONS IN
ACCORDANCE WITH SECTION 6.1(B).  UNVESTED SUPPLIER OPTIONS HELD BY THE
DESIGNATED KEY RECIPIENT IDENTIFIED ON SCHEDULE I WILL REMAIN UNDER THE TERMS OF
THE SUPPLIER STOCK INCENTIVE PLAN AS UNVESTED KEY SUPPLIER OPTIONS.  SUPPLIER
WILL ADMINISTER THE APPLICABLE SUPPLIER STOCK INCENTIVE PLAN TO PROVIDE THAT THE
HOLDERS OF THE KEY SUPPLIER OPTIONS WILL NOT BE TREATED AS TERMINATING
EMPLOYMENT OR SERVICE WITH SUPPLIER DUE TO THE DISTRIBUTION, SOLELY FOR PURPOSES
OF DETERMINING THE TERMS APPLICABLE TO THE KEY SUPPLIER

 

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OPTIONS AFTER THE DISTRIBUTION DATE.  THE TERM, VESTING AND OTHER TERMS OF THE
SPINCO OPTIONS WILL BE THE SAME AS THE TERMS OF THE CURRENT SUPPLIER OPTIONS. 
THE VALUATION AND DETERMINATION OF THE NUMBER OF SPINCO OPTIONS AND SUPPLIER
OPTIONS WILL BE MADE IN THE SAME MANNER AS DESCRIBED IN SECTION 6.1(B)(I).

 

(D)                                 EACH RECIPIENT OF SUPPLIER OPTIONS WHO IS A
DIRECTOR OF SUPPLIER (“DIRECTOR RECIPIENT”) BEFORE THE DISTRIBUTION DATE WILL
HAVE 30% OF HIS OR HER UNEXERCISED SUPPLIER OPTIONS CONVERTED INTO SPINCO
OPTIONS UNDER THE SPINCO STOCK INCENTIVE PLAN AS OF THE DISTRIBUTION DATE.  THE
REMAINING 70% OF HIS OR HER UNEXERCISED SUPPLIER OPTIONS SHALL REMAIN UNDER THE
TERMS OF THE SUPPLIER STOCK INCENTIVE PLAN (“DIRECTOR SUPPLIER OPTIONS”). 
SUPPLIER WILL ADMINISTER THE APPLICABLE SUPPLIER STOCK PLAN TO PROVIDE THAT THE
HOLDERS OF THE DIRECTOR SUPPLIER OPTIONS WHO DO NOT REMAIN AS DIRECTORS OF
SUPPLIER AFTER THE DISTRIBUTION WILL NOT BE TREATED AS TERMINATING SERVICE FROM
SUPPLIER DUE TO THE DISTRIBUTION, SOLELY FOR PURPOSES OF DETERMINING THE TERMS
APPLICABLE TO THE DIRECTOR SUPPLIER OPTIONS AFTER THE DISTRIBUTION DATE.  THE
TERM, VESTING AND OTHER TERMS OF THE SPINCO OPTIONS WILL BE THE SAME AS THE
TERMS OF THE CURRENT SUPPLIER OPTIONS.  THE VALUATION AND DETERMINATION OF THE
NUMBER OF SPINCO OPTIONS AND SUPPLIER OPTIONS WILL BE MADE IN THE SAME MANNER AS
DESCRIBED IN SECTION 6.1(B)(I).

 

(E)                                  SPINCO SHALL MAKE SUCH ADDITIONAL AWARDS
UNDER THE SPINCO STOCK INCENTIVE PLAN TO ACTIVE SPINCO EMPLOYEES, CONSULTANTS
AND DIRECTORS AS IT IN ITS SOLE DISCRETION DEEMS APPROPRIATE.

 

6.2                               EMPLOYEE STOCK PURCHASE PLAN.

 

(A)                                  EFFECTIVE AS OF THE DISTRIBUTION DATE,
SPINCO SHALL ESTABLISH AN EMPLOYEE STOCK PURCHASE PLAN (THE “SPINCO ESPP”) THAT
WILL PROVIDE BENEFITS THAT ARE SIMILAR TO THOSE PROVIDED UNDER THE SUPPLIER
EMPLOYEE STOCK PURCHASE PLAN (THE “SUPPLIER ESPP”) IMMEDIATELY BEFORE THE
DISTRIBUTION DATE.

 

(B)                                 EFFECTIVE AS OF THE DISTRIBUTION DATE,
SUPPLIER SHALL AMEND THE SUPPLIER ESPP TO PROVIDE THAT ANY AMOUNTS CONTRIBUTED
BY ACTIVE SPINCO EMPLOYEES TO THE SUPPLIER ESPP SHALL BE TRANSFERRED TO SPINCO
AND SHALL BE APPLIED TO THE PURCHASE OF SPINCO COMMON STOCK UNDER THE SPINCO
ESPP.  THE RIGHTS TO PURCHASE SUPPLIER COMMON STOCK, WHICH HAVE BEEN EARNED
UNDER THE SUPPLIER ESPP SHALL BE CONVERTED, IN ACCORDANCE WITH THE PROCEDURES
DESCRIBED IN SECTION 6.1(B) AND APPLICABLE LAW, INTO RIGHTS TO PURCHASE SPINCO
COMMON STOCK UNDER THE SPINCO ESPP EFFECTIVE AS OF THE CLOSING DATE.  THE
INITIAL “PURCHASE PERIOD” UNDER THE SPINCO ESPP WILL END ON THE SAME DATE THAT
SUCH PERIOD IS SCHEDULED TO END UNDER THE SUPPLIER ESPP.  ADDITIONAL PURCHASE
PERIODS UNDER THE SPINCO ESPP WILL BE SUBJECT TO THE TERMS AND CONDITIONS
DETERMINED BY SPINCO IN ITS SOLE DISCRETION.

 

ARTICLE VII
FOREIGN PLANS

 

7.1                               FOREIGN RETIREMENT PLANS.  SUPPLIER AND SPINCO
SHALL USE THEIR REASONABLE BEST EFFORTS SO THAT, AS SOON AS PRACTICABLE AFTER
THE DISTRIBUTION DATE, ALL SUPPLIER FOREIGN PLANS WHICH PROVIDE RETIREMENT
BENEFITS SOLELY TO ACTIVE SPINCO EMPLOYEES AND FORMER SPINCO EMPLOYEES SHALL BE
ASSUMED BY SPINCO TOGETHER WITH ALL RELATED ASSETS AND LIABILITIES AND NEITHER

 

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SUPPLIER NOR ANY SUPPLIER GROUP PLAN SHALL RETAIN ANY LIABILITY WITH RESPECT TO
SUCH FOREIGN PLANS.

 

7.2                               FOREIGN WELFARE PLANS.  SUPPLIER AND SPINCO
SHALL USE THEIR REASONABLE BEST EFFORTS, EFFECTIVE AS OF THE DISTRIBUTION DATE,
AND TO THE EXTENT ALLOWED UNDER FOREIGN LAWS, TO HANDLE THE FOREIGN PLANS WHICH
PROVIDE WELFARE BENEFITS IN A MANNER WHICH MIRRORS THE APPROACH OUTLINED IN THIS
AGREEMENT FOR THE VARIOUS EMPLOYEE BENEFIT PLANS.

 

ARTICLE VIII
ACCOUNTING

 

8.1                               PAYMENT OF AND ACCOUNTING TREATMENT FOR
EXPENSES.

 

(A)                                  EXCEPT AS SPECIFICALLY PROVIDED IN THIS
AGREEMENT, ALL EXPENSES (AND THE ACCOUNTING TREATMENT RELATED TO SUCH EXPENSES)
RELATED TO LIABILITIES THROUGH THE DISTRIBUTION DATE REGARDING MATTERS ADDRESSED
IN THIS AGREEMENT SHALL BE HANDLED AND ADMINISTERED IN THE ORDINARY COURSE BY
SUPPLIER AND SPINCO IN ACCORDANCE WITH PAST SUPPLIER ACCOUNTING AND FINANCIAL
PRACTICES AND PROCEDURES PERTAINING TO SUCH MATTERS.  TO THE EXTENT SUCH
EXPENSES ARE UNPAID AS OF THE DISTRIBUTION DATE THAT PERTAIN TO ACTIVE SPINCO
EMPLOYEES OR FORMER SPINCO EMPLOYEES, SPINCO SHALL BE SOLELY RESPONSIBLE FOR
SUCH PAYMENT, WITHOUT REGARD TO ANY ACCOUNTING TREATMENT TO BE ACCORDED SUCH
EXPENSE BY SUPPLIER OR SPINCO ON THEIR RESPECTIVE BOOKS AND RECORDS.  THE
ACCOUNTING TREATMENT TO BE ACCORDED ALL SUCH EXPENSES, WHETHER SUCH EXPENSES ARE
PAID BY SUPPLIER OR SPINCO, SHALL BE DETERMINED BY SUPPLIER.

 

(B)                                 SPINCO SHALL ASSUME ANY BALANCE SHEET
LIABILITY FOR ANY LIABILITIES ASSUMED BY IT UNDER THIS AGREEMENT AS OF THE
DISTRIBUTION DATE OR THEREAFTER, WITH RESPECT TO ANY ACTIVE SPINCO EMPLOYEE OR
FORMER SPINCO EMPLOYEES.  THE DETERMINATION OF ANY BALANCE SHEET LIABILITY AS OF
THE CLOSE OF BUSINESS ON THE DISTRIBUTION DATE SHALL BE DETERMINED BY SUPPLIER
CONSISTENT WITH PAST ACCOUNTING PRACTICES, CONSISTENTLY APPLIED.

 

8.2                               ACCOUNTING ADJUSTMENTS.  BEFORE THE
DISTRIBUTION DATE, SPINCO WILL HAVE ESTABLISHED ON ITS BOOKS FOR FINANCIAL
ACCOUNTING PURPOSES LIABILITIES AND RESERVES FOR DEFERRED COMPENSATION, WELFARE
AND OTHER EMPLOYEE BENEFIT PLAN OBLIGATIONS THAT WILL BE RETAINED OR ASSUMED BY
SPINCO UNDER THIS AGREEMENT, AND SUPPLIER WILL HAVE ADJUSTED THE LIABILITIES AND
RESERVES ON ITS BOOKS FOR FINANCIAL ACCOUNTING PURPOSES TO TAKE INTO ACCOUNT
SPINCO’S ASSUMPTION OR RETENTION OF LIABILITIES UNDER THIS AGREEMENT.  THE
INITIAL ADJUSTMENTS AS OF THE DISTRIBUTION DATE WILL BE MADE ON AN ESTIMATED
BASIS.  AFTER THE PARTIES HAVE FINALLY CALCULATED THE ACTUAL LIABILITIES UNDER
THIS AGREEMENT, EACH PARTY SHALL APPROPRIATELY ADJUST ITS LIABILITIES AND
RESERVES TO REFLECT THE AMOUNT OF THE LIABILITIES AND RESERVES THAT ARE PROPERLY
ALLOCABLE TO THAT PARTY.

 

15

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ARTICLE IX
AUDITS; INFORMATION SHARING

 

9.1                               AUDITS.

 

(A)                                  EACH OF SUPPLIER AND SPINCO, AND THEIR DULY
AUTHORIZED REPRESENTATIVES, SHALL HAVE THE RIGHT TO CONDUCT AUDITS AT ANY TIME
UPON REASONABLE PRIOR NOTICE, AT THEIR OWN EXPENSE, WITH RESPECT TO ALL
INFORMATION PROVIDED TO IT OR TO ANY PLAN TRUSTEE, RECORDKEEPER OR THIRD-PARTY
ADMINISTRATOR BY THE OTHER PARTY.  THE PARTY CONDUCTING THE AUDIT SHALL HAVE THE
SOLE DISCRETION TO DETERMINE THE PROCEDURES AND GUIDELINES FOR CONDUCTING AUDITS
AND THE SELECTION OF AUDIT REPRESENTATIVES UNDER THIS SECTION.  THE AUDITING
PARTY SHALL HAVE THE RIGHT TO MAKE COPIES OF ANY RECORDS AT ITS EXPENSE.  THE
PARTY BEING AUDITED SHALL PROVIDE THE AUDITING PARTY’S REPRESENTATIVES WITH
REASONABLE ACCESS DURING NORMAL BUSINESS HOURS TO ITS OPERATIONS, COMPUTER
SYSTEMS AND PAPER AND ELECTRONIC FILES, AND PROVIDE WORKSPACE TO ITS
REPRESENTATIVES.  AFTER ANY AUDIT IS COMPLETED, THE PARTY BEING AUDITED SHALL
HAVE THE RIGHT TO REVIEW A DRAFT OF THE AUDIT FINDINGS AND TO COMMENT ON THOSE
FINDINGS IN WRITING WITHIN TEN BUSINESS DAYS AFTER RECEIVING SUCH DRAFT.

 

(B)                                 THE AUDITING PARTY’S AUDIT RIGHTS UNDER THIS
SECTION SHALL INCLUDE THE RIGHT TO AUDIT, OR PARTICIPATE IN AN AUDIT FACILITATED
BY THE PARTY BEING AUDITED, OF ANY SUBSIDIARIES AND AFFILIATES OF THE PARTY
BEING AUDITED AND OF ANY BENEFIT PROVIDERS AND THIRD PARTIES WITH WHOM THE PARTY
BEING AUDITED HAS A RELATIONSHIP, OR AGENTS OF SUCH PARTY, TO THE EXTENT ANY
SUCH PERSONS ARE AFFECTED BY OR ADDRESSED IN THIS AGREEMENT.  THE PARTY BEING
AUDITED SHALL, UPON WRITTEN REQUEST FROM THE AUDITING PARTY, PROVIDE AN
INDIVIDUAL (AT THE AUDITING PARTY’S EXPENSE) TO SUPERVISE ANY AUDIT OF ANY SUCH
BENEFIT PROVIDER OR THIRD-PARTY.  THE AUDITING PARTY SHALL BE RESPONSIBLE FOR
SUPPLYING, AT ITS EXPENSE, ADDITIONAL PERSONNEL SUFFICIENT TO COMPLETE THE AUDIT
IN A REASONABLY TIMELY MANNER.

 

9.2                               SHARING OF PARTICIPANT INFORMATION.  SUBJECT
TO ANY LIMITATIONS EXPRESSLY PROVIDED FOR HEREIN, SUPPLIER AND SPINCO SHALL
SHARE, SUPPLIER SHALL CAUSE EACH APPLICABLE AFFILIATE OF SUPPLIER TO SHARE, AND
SPINCO SHALL CAUSE EACH APPLICABLE AFFILIATE OF SPINCO TO SHARE, WITH EACH OTHER
AND THEIR RESPECTIVE AGENTS AND VENDORS (WITHOUT OBTAINING RELEASES) ALL
PARTICIPANT INFORMATION NECESSARY FOR THE EFFICIENT AND ACCURATE ADMINISTRATION
OF EACH OF THE SUPPLIER PLANS AND THE SPINCO PLANS.  SUPPLIER AND SPINCO AND
THEIR RESPECTIVE AUTHORIZED AGENTS SHALL, SUBJECT TO APPLICABLE LAWS ON
CONFIDENTIALITY, BE GIVEN REASONABLE AND TIMELY ACCESS TO, AND MAY MAKE COPIES
OF, ALL INFORMATION RELATING TO THE SUBJECTS OF THIS AGREEMENT IN THE CUSTODY OF
THE OTHER PARTY, TO THE EXTENT NECESSARY FOR SUCH ADMINISTRATION.

 

ARTICLE X
GENERAL

 

10.1                        NOTICES.  ALL NOTICES, REQUESTS, CLAIMS AND OTHER
COMMUNICATIONS HEREUNDER SHALL BE IN WRITING AND SHALL BE GIVEN OR MADE (AND
SHALL BE DEEMED TO HAVE BEEN DULY GIVEN OR MADE UPON RECEIPT) BY DELIVERY BY
HAND, BY REPUTABLE OVERNIGHT COURIER SERVICE, BY FACSIMILE

 

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TRANSMISSION, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID, RETURN
RECEIPT REQUESTED) TO THE RESPECTIVE PARTIES AT THE ADDRESSES LISTED BELOW:

 

if to Supplier, to:

 

Pharmacopeia, Inc.

 

 

9685 Scranton Road

 

 

San Diego, CA

 

 

Attn.:

Vice President, Human Resources

 

 

Fax:

(858) 799-5100

 

 

 

if to Spinco, to:

 

Pharmacopeia Drug Discovery, Inc.

 

 

3000 Eastpark Blvd.

 

 

Cranbury, NJ 08512

 

 

Attn:

Executive Vice President, Human Resources

 

 

Fax:

(609) 452-3671

 

or to such other address as any Party may, from time to time, designate in a
written notice given in accordance with this Section.  Notice given by hand
shall be deemed delivered when received by the recipient.  Notice given by mail
as set out above shall be deemed delivered five calendar days after the date the
same is mailed.  Notice given by reputable overnight courier shall be deemed
delivered on the next following business day after the same is sent.  Notice
given by facsimile transmission shall be deemed delivered on the day of
transmission provided telephone confirmation of receipt is obtained promptly
after completion of transmission.

 

10.2                        AMENDMENT AND WAIVER.  THIS AGREEMENT MAY NOT BE
ALTERED OR AMENDED, NOR MAY RIGHTS HEREUNDER BE WAIVED, EXCEPT BY AN INSTRUMENT
IN WRITING EXECUTED BY THE PARTY OR PARTIES TO BE CHARGED WITH SUCH AMENDMENT OR
WAIVER.  NO WAIVER OF ANY TERM, PROVISION OR CONDITION OF OR FAILURE TO EXERCISE
OR DELAY IN EXERCISING ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT, IN ANY ONE
OR MORE INSTANCES, SHALL BE DEEMED TO BE, OR CONSTRUED AS, A FURTHER OR
CONTINUING WAIVER OF ANY SUCH TERM, PROVISION, CONDITION, RIGHT OR REMEDY OR AS
A WAIVER OF ANY OTHER TERM, PROVISION OR CONDITION OF THIS AGREEMENT.

 

10.3                        ENTIRE AGREEMENT.  THIS AGREEMENT CONSTITUTES THE
ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREIN
ADDRESSED, SUPERSEDING ALL NEGOTIATIONS, PRIOR DISCUSSIONS AND PRIOR AGREEMENTS
AND UNDERSTANDINGS RELATING TO SUCH SUBJECT MATTER.

 

10.4                        PARTIES IN INTEREST.  NEITHER OF THE PARTIES MAY
ASSIGN ITS RIGHTS OR DELEGATE ANY OF ITS DUTIES UNDER THIS AGREEMENT WITHOUT THE
PRIOR WRITTEN CONSENT OF THE OTHER PARTY (WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED).  THIS AGREEMENT SHALL BE BINDING UPON, AND
SHALL INURE TO THE BENEFIT OF, THE PARTIES AND THEIR RESPECTIVE SUCCESSORS AND
PERMITTED ASSIGNS.

 

10.5                        NO THIRD-PARTY BENEFICIARIES; NO TERMINATION OF
EMPLOYMENT.  NO PROVISION OF THIS AGREEMENT SHALL BE CONSTRUED TO CREATE ANY
RIGHT, OR ACCELERATE ENTITLEMENT, TO ANY COMPENSATION OR BENEFIT WHATSOEVER ON
THE PART OF ANY ACTIVE SPINCO EMPLOYEE OR FORMER SPINCO EMPLOYEE UNDER ANY
SUPPLIER PLAN OR SPINCO PLAN OR OTHERWISE.  WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, NEITHER THE DISTRIBUTION NOR THE TERMINATION OF THE CONTROLLED
GROUP STATUS OF A AFFILIATE OF SPINCO SHALL CAUSE ANY EMPLOYEE TO BE DEEMED TO
HAVE INCURRED A

 

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TERMINATION OF EMPLOYMENT THAT BY ITSELF ENTITLES SUCH INDIVIDUAL TO THE
COMMENCEMENT OF BENEFITS UNDER ANY OF THE SUPPLIER PLANS, ANY OF THE SPINCO
PLANS, OR ANY INDIVIDUAL AGREEMENTS.

 

10.6                        RIGHT TO AMEND OR TERMINATE ANY PLANS.  NOTHING IN
THIS AGREEMENT OTHER THAN THOSE PROVISIONS SPECIFICALLY SET FORTH IN THIS
AGREEMENT TO THE CONTRARY SHALL PRECLUDE SPINCO OR SUPPLIER, AT ANY TIME AFTER
THE DISTRIBUTION DATE, FROM AMENDING, MERGING, MODIFYING, TERMINATING,
ELIMINATING, REDUCING, OR OTHERWISE ALTERING IN ANY RESPECT ANY SPINCO PLAN OR
SUPPLIER PLAN, RESPECTIVELY, ANY BENEFIT UNDER ANY PLAN OR ANY TRUST, INSURANCE
POLICY OR FUNDING VEHICLE RELATED TO ANY SPINCO PLAN OR SUPPLIER PLAN.

 

10.7                        EFFECT IF DISTRIBUTION DOES NOT OCCUR.  IF THE
DISTRIBUTION DOES NOT OCCUR, THEN ALL ACTIONS AND EVENTS THAT ARE, UNDER THIS
AGREEMENT, TO BE TAKEN OR OCCUR EFFECTIVE AS OF THE DISTRIBUTION DATE,
IMMEDIATELY AFTER THE DISTRIBUTION DATE, OR OTHERWISE IN CONNECTION WITH THE
DISTRIBUTION, SHALL NOT BE TAKEN OR OCCUR EXCEPT TO THE EXTENT SPECIFICALLY
AGREED TO IN WRITING BY SPINCO AND SUPPLIER.

 

10.8                        RELATIONSHIP OF PARTIES.  NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR CONSTRUED BY THE PARTIES OR ANY THIRD PARTY AS CREATING THE
RELATIONSHIP OF PRINCIPAL AND AGENT, OR A PARTNERSHIP OR JOINT VENTURE BETWEEN
THE PARTIES, IT BEING UNDERSTOOD AND AGREED THAT NO PROVISION CONTAINED IN THIS
AGREEMENT, AND NO ACT OF THE PARTIES, SHALL BE DEEMED TO CREATE ANY RELATIONSHIP
BETWEEN THE PARTIES OTHER THAN THE RELATIONSHIP SET FORTH IN THIS AGREEMENT.

 

10.9                        AFFILIATES.  EACH OF SUPPLIER AND SPINCO SHALL CAUSE
TO BE PERFORMED, AND HEREBY GUARANTEES THE PERFORMANCE OF, ALL ACTIONS,
AGREEMENTS AND OBLIGATIONS SET FORTH IN THIS AGREEMENT TO BE PERFORMED BY
AFFILIATES OF SUPPLIER OR AFFILIATES OF SPINCO, RESPECTIVELY, WHERE RELEVANT.

 

10.10                 FURTHER ASSURANCES AND CONSENTS   IN ADDITION TO THE
ACTIONS SPECIFICALLY PROVIDED FOR ELSEWHERE IN THIS AGREEMENT, EACH OF THE
PARTIES WILL USE ITS REASONABLE BEST EFFORTS TO (A) EXECUTE AND DELIVER SUCH
FURTHER INSTRUMENTS AND DOCUMENTS AND TAKE SUCH OTHER ACTIONS AS ANY OTHER PARTY
MAY REASONABLY REQUEST IN ORDER TO EFFECTUATE THE PURPOSES OF THIS AGREEMENT AND
TO CARRY OUT THE TERMS OF THIS AGREEMENT AND (B) TAKE, OR CAUSE TO BE TAKEN, ALL
ACTIONS, AND TO DO, OR CAUSE TO BE DONE, ALL THINGS, REASONABLY NECESSARY,
PROPER OR ADVISABLE UNDER APPLICABLE LAWS, REGULATIONS AND AGREEMENTS OR
OTHERWISE TO CONSUMMATE AND MAKE EFFECTIVE THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, USING ITS REASONABLE BEST EFFORTS TO
OBTAIN ANY CONSENTS AND APPROVALS AND TO MAKE ANY FILINGS AND APPLICATIONS
NECESSARY OR DESIRABLE IN ORDER TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT; PROVIDED THAT NO PARTY SHALL BE OBLIGATED TO PAY ANY
CONSIDERATION THEREFOR (EXCEPT FOR FILING FEES AND OTHER SIMILAR CHARGES) TO ANY
THIRD-PARTY FROM WHOM SUCH CONSENTS, APPROVALS AND AMENDMENTS ARE REQUESTED OR
TO TAKE ANY ACTION OR OMIT TO TAKE ANY ACTION IF THE TAKING OF OR THE OMISSION
TO TAKE SUCH ACTION WOULD BE UNREASONABLY BURDENSOME TO THE PARTY.

 

10.11                 SEVERABILITY.  THE PROVISIONS OF THIS AGREEMENT ARE
SEVERABLE AND SHOULD ANY PROVISION OF THIS AGREEMENT BE VOID, VOIDABLE OR
UNENFORCEABLE UNDER ANY APPLICABLE LAW, SUCH PROVISION SHALL NOT AFFECT OR
INVALIDATE ANY OTHER PROVISION OF THIS AGREEMENT, WHICH SHALL CONTINUE TO GOVERN
THE RELATIVE RIGHTS AND DUTIES OF THE PARTIES AS THOUGH SUCH VOID, VOIDABLE OR
UNENFORCEABLE PROVISION WERE NOT PART OF THIS AGREEMENT.

 

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10.12                 GOVERNING LAW.  SUBJECT TO FEDERAL LAW, THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO THE CONFLICTS OF LAW RULES OF SUCH STATE.

 

10.13                 COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ONE OR
MORE COUNTERPARTS EACH OF WHICH SHALL BE DEEMED AN ORIGINAL INSTRUMENT, BUT ALL
OF WHICH TOGETHER SHALL CONSTITUTE BUT ONE AND THE SAME AGREEMENT.

 

10.14                 DISPUTES.

 

(A)                                  RESOLUTION OF ANY AND ALL DISPUTES ARISING
FROM OR IN CONNECTION WITH THIS AGREEMENT, WHETHER BASED ON CONTRACT, TORT,
STATUTE OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, DISPUTES IN CONNECTION WITH
CLAIMS BY THIRD PARTIES (COLLECTIVELY, “DISPUTES”), SHALL BE SUBJECT TO THE
PROVISIONS OF THIS SECTION 10.14; PROVIDED, HOWEVER, THAT NOTHING CONTAINED IN
THIS AGREEMENT SHALL PRECLUDE EITHER PARTY FROM SEEKING OR OBTAINING (I)
INJUNCTIVE RELIEF OR (II) EQUITABLE OR OTHER JUDICIAL RELIEF TO ENFORCE THE
PROVISIONS OF THIS AGREEMENT OR TO PRESERVE THE STATUS QUO PENDING RESOLUTION OF
DISPUTES HEREUNDER.

 

(B)                                 EITHER PARTY MAY GIVE THE OTHER PARTY
WRITTEN NOTICE OF ANY DISPUTE NOT RESOLVED IN THE NORMAL COURSE OF BUSINESS. 
THE PARTIES SHALL ATTEMPT IN GOOD FAITH TO RESOLVE ANY DISPUTE PROMPTLY BY
NEGOTIATION BETWEEN EXECUTIVES OF THE PARTIES WHO HAVE AUTHORITY TO SETTLE THE
CONTROVERSY AND WHO ARE AT A HIGHER LEVEL OF MANAGEMENT THAN THE PERSONS WITH
DIRECT RESPONSIBILITY FOR ADMINISTRATION OF THIS AGREEMENT.  WITHIN 30 DAYS
AFTER DELIVERY OF THE NOTICE, THE FOREGOING EXECUTIVES OF BOTH PARTIES SHALL
MEET AT A MUTUALLY ACCEPTABLE TIME AND PLACE, AND THEREAFTER AS OFTEN AS THEY
REASONABLY DEEM NECESSARY FOR A PERIOD NOT TO EXCEED 15 BUSINESS DAYS, TO
ATTEMPT TO RESOLVE THE DISPUTE.  ALL REASONABLE REQUESTS FOR INFORMATION MADE BY
ONE PARTY TO THE OTHER WILL BE HONORED.  IF THE PARTIES DO NOT RESOLVE THE
DISPUTE WITHIN SUCH 45 BUSINESS DAY PERIOD (THE “INITIAL NEGOTIATION PERIOD”),
THE PARTIES SHALL ATTEMPT IN GOOD FAITH TO RESOLVE THE DISPUTE BY NEGOTIATION
BETWEEN (A) IN THE CASE OF SUPPLIER, THE CHIEF FINANCIAL OFFICER AND (B) IN THE
CASE OF SPINCO, THE CHIEF FINANCIAL OFFICER (COLLECTIVELY, “DESIGNATED
OFFICERS”).  SUCH OFFICERS SHALL MEET AT A MUTUALLY ACCEPTABLE TIME AND PLACE
(BUT IN ANY EVENT NO LATER THAN 15 BUSINESS DAYS FOLLOWING THE EXPIRATION OF THE
INITIAL NEGOTIATION PERIOD) AND THEREAFTER AS OFTEN AS THEY REASONABLY DEEM
NECESSARY FOR A PERIOD NOT TO EXCEED 15 BUSINESS DAYS, TO ATTEMPT TO RESOLVE THE
DISPUTE.

 

(C)                                  IF THE DISPUTE HAS NOT BEEN RESOLVED BY
NEGOTIATION WITHIN 75 BUSINESS DAYS OF THE FIRST PARTY’S NOTICE, OR IF THE
PARTIES FAILED TO MEET WITHIN 30 BUSINESS DAYS OF THE FIRST PARTY’S NOTICE, OR
IF THE DESIGNATED OFFICERS FAILED TO MEET WITHIN 60 BUSINESS DAYS OF THE FIRST
PARTY’S NOTICE, EITHER PARTY MAY COMMENCE ANY LITIGATION OR OTHER PROCEDURE
ALLOWED BY LAW.

 

10.15                 ASSIGNMENT.  NEITHER OF THE PARTIES MAY ASSIGN OR DELEGATE
ANY OF ITS RIGHTS OR DUTIES UNDER THIS AGREEMENT WITHOUT THE PRIOR WRITTEN
CONSENT OF THE OTHER PARTY, WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD;
PROVIDED THAT SUPPLIER MAY, AT ANY TIME, ASSIGN OR DELEGATE ITS RIGHTS OR DUTIES
HEREUNDER TO ACCELRYS, INC WITHOUT OBTAINING THE CONSENT OF SPINCO.  THIS
AGREEMENT SHALL BE BINDING UPON, AND SHALL INURE TO THE BENEFIT OF, THE PARTIES
AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS.  NOTWITHSTANDING THE
FOREGOING, SPINCO MAY, AND HEREBY GIVES NOTICE TO SUPPLIER THAT IT INTENDS TO,
PLEDGE ITS RIGHTS AND OBLIGATIONS UNDER THIS

 

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AGREEMENT TO ITS LENDERS AS COLLATERAL TO SECURE INDEBTEDNESS OUTSTANDING UNDER
ITS SENIOR SECURED CREDIT FACILITY AND ALL RENEWALS, REFUNDINGS, REFINANCINGS
AND REPLACEMENTS THEREOF.

 

10.16                 INTERPRETATION.  WORDS IN THE SINGULAR SHALL BE HELD TO
INCLUDE THE PLURAL AND VICE VERSA AND WORDS OF ONE GENDER SHALL BE HELD TO
INCLUDE THE OTHER GENDERS AS THE CONTEXT REQUIRES.  THE WORD “INCLUDING” AND
WORDS OF SIMILAR IMPORT WHEN USED IN THIS AGREEMENT MEANS “INCLUDING, WITHOUT
LIMITATION,” UNLESS THE CONTEXT OTHERWISE REQUIRES OR UNLESS OTHERWISE
SPECIFIED.

 

10.17                 HEADINGS.  THE ARTICLE AND SECTION HEADINGS CONTAINED IN
THIS AGREEMENT ARE SOLELY FOR THE PURPOSE OF REFERENCE, ARE NOT PART OF THE
AGREEMENT OF THE PARTIES AND SHALL NOT IN ANY WAY AFFECT THE MEANING OR
INTERPRETATION OF THIS AGREEMENT.

 

*                                        
*                                        
*                                        
*                                         *

 

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IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of
the day and year first above written.

 

 

 

PHARMACOPEIA, INC.

 

 

 

 

 

By:

/s/ John J. Hanlon

 

 

Name: John J. Hanlon

 

 

Title: Chief Financial Officer

 

 

 

 

 

PHARMACOPEIA DRUG DISCOVERY, INC.

 

 

 

 

 

By:

/s/ Joseph A. Mollica, Ph.D.

 

 

Name: Joseph A. Mollica, Ph.D.

 

 

Title: President and Chief Executive Officer

 

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